07:02 AM EDT, 03/12/2025 (MT Newswires) -- The Bank of Canada meeting of Wednesday will need to weigh current/past fundamentals against risk factors of unknown magnitude, said RBC.

Canada's central bank is slated to release the policy statement at 9:45 a.m. ET on Wednesday.

Unlike 2024 and early 2025 when RBC had high conviction in the path and sequencing of monetary policy, Wednesday's meeting is truly a "head scratcher." Markets and consensus have firmly gravitated to a rate cut and the BoC might find it hard to paddle against the current.

The bank ascribes a much lower probability (55%-60%) to a 25bps cut than markets -- the arguments are finely balanced between cut and hold, and RBC could easily argue for a hold but have higher conviction that it won't be a dovish cut.

A 50bps reduction is unnecessary, stated te bank. The reason this meeting is so challenging is because the hard data and the BoC's output gap framework are wholly inconsistent with a cut.

However, the soft/qualitative data, risks -- unknown magnitude-- and public optics tilt the balance to a relatively costless insurance cut, added RBC.