Economists at TD Bank Financial Group say that they expect the Bank of Canada to hold the line on rates for now, even though the market is still pricing in hope for a cut.

“Canadian data over the past month has told a fairly consistent story. That is, the Canadian economy remains in good health, and so far, has managed to absorb the downside from the massive 70% rally in the Canadian dollar,” TD says, and the Bank of Canada opted to keep the overnight rate on hold at 4.5% on October 16.

TD notes that there was a slightly dovish tone to the bank’s latest policy statement, as it reiterated the strength of the domestic economy, while reminding markets of the downside risks from the Canadian dollar and the U.S. housing market. And the Bank, “transparently stated that ‘in this base-case projection, there is no change in the policy interest rate’ which went far to manage expectations for near term rate decisions,” it says.

Prior to October 16, TD still expected that the next move for the Bank would be a rate hike. “With such a transparent statement, we revised our expectations for Bank of Canada and now expect steady rates,” it says.

However, it notes that there are still a number of risks which complicate the decision making process for the Bank and underpin the decision to stay on hold. “The economy is clearly operating well above capacity, but the Bank will probably wait and see how much the strong loonie does the Bank’s heavy lifting in terms of a de facto rate hike. Once this delicate balance sways in either direction, we are likely to see more definitive action from the central bank. Until then, the Bank of Canada will cozy up on the sidelines,” TD concludes.

That said, it notes that the futures market continues to price in cautious rate cuts by the Bank of Canada.