07:22 AM EDT, 07/28/2025 (MT Newswires) -- RBC said it's expecting the Bank of Canada to leave the overnight rate unchanged again on Wednesday at 9:45 a.m. ET.

In its last Monetary Policy Report, the Canadian central bank took the unusual step of not providing a base case growth forecast but scenario analysis, given the enormous uncertainty tied to international trade at the time.

RBC will be watching Wednesday's MPR closely for new projections, but it doesn't expect any surprises regarding the decision to hold the overnight rate steady. The BoC has remained on the sidelines for the past two meetings after cutting the overnight rate by 225 basis points since June 2024.

Trade tensions remain heightened and economic data is still soft. However, the Canadian labor market showed signs of bottoming out in June, and sentiment indicators, which took a nosedive in March, have also partially recovered, stated the bank.

Critically for Canada, CUSMA exemptions are allowing the vast majority of Canadian goods exports to enter the United States duty-free, pointed out RBC. Echoing business reports from the latest BoC outlook survey, the bank continues to consider the most severe economic scenarios as less probable than earlier in spring, and expects the economy will remain soft over the second half of this year but won't contract.

More "unnerving" for the BoC are recent inflation reports that have surprised broadly to the upside, accoridng to the bank. Its preferred core measures have edged higher in 2025, driven mostly by building pressures among domestic services components. This contradicts earlier expectations that softening in domestic demand would lead to further disinflation and easing in core inflation.

Overall, sticky inflation readings, a weakening but relatively resilient economic backdrop and prospects for larger fiscal spending are reasons why RBC doesn't expect the BoC will cut again in this cycle.