Canada will take centre stage next week, with an interest rate decision due amid a slew of economic reports. U.S. traders face a quieter, holiday-shortened week.

Canadian wholesale trade numbers are due on Monday. That’s the last bit of data out before Tuesday’s rate announcement from the Bank of Canada.

Wednesday will see the release of consumer inflation numbers and manufacturing shipments. Retail sales numbers are slated for Thursday, along with a monetary policy update and international securities transaction data.

The big news will be the rate announcement. “The Bank of Canada’s rate announcement and policy report will top the agenda,” observes CIBC World Markets. “Both should echo previous releases, with rates staying on hold pending greater certainty in foreign markets, and the monetary report still warning of the need for a policy tightening to ward off an inflation threat down the road. Given the recent uptick in CPI headlines, the Bank will likely devote some ink to explaining away the near term threat to price stability.”

TD Bank says that, despite a rumour that a New York-based hedge fund had called for the Bank to raise rates this month, “We believe a move is extremely unlikely. Although last Friday’s Canadian employment report was undeniably strong, the increase in the labour force participation rate suggests that wage pressures will not rise sufficiently quickly to necessitate a rapid-fire response from the Bank. Accordingly, we continue to believe that the Bank of Canada will remain on hold until June, with Thursday’s Monetary Policy Report Update providing Bank officials with another forum to explain their reasoning.”

BMO Nesbitt Burns echoes TD, saying it heard the rate hike rumours, too, but that it doesn’t see the Bank moving just yet. “The Bank is almost universally expected to hold rates steady for now, although most believe that the rate hike cycle will resume in the months ahead,” it says. “With core inflation now above the top end of the 3% target band and employment still on an absolute roll, a rate hike at the March or April meeting appears increasingly likely.”

Apart from the rate decision, CIBC says that, “Weaker prices and nominal exports for November point to a drop in manufacturing shipments for the month. Auto sales declines will weigh heavily on retail sales for the month. If we’re right on both counts, monthly GDP for November is shaping up to be weaker than October’s 0.3% advance. As for prices, an Ontario electricity rebate will show up in declines in both core and headline CPI.”

Nesbitt calls the CPI report “critical”, noting that after reaching a 12-year high on both total inflation (4.3%) and core inflation (3.1%) in November, prices are expected to fall heavily due to the rollback and rebate on electricity prices in Ontario. “However, the decline in prices might prove to be a one-month reprieve for inflation, as rising energy prices, resurgent home prices and a strong economy continue to pose a meaningful risk to the Bank’s official benign forecast of a smooth return to 2% core inflation by the second half.”

Nesbitt sees retail sales slumping on lower auto sales. It notes, “While Canadian retail sales have bounced all over the map in the past year, the underlying trend has been solid. Given robust job growth and low borrowing costs, consumer fundamentals remain quite healthy in Canada.”

In contrast, it will be a relatively quiet week in the U.S. next week. Markets will be closed on Monday to observe Martin Luther King Day.

The only economic data on the schedule is housing starts on Tuesday and the leading indicator on Thursday. “In the U.S., earnings news and warnings will get much more attention than economic data,” CIBC says. Although, it notes, “The weekly jobless claims data, heavily seasonally adjusted at this time of year, will bear some watching to see if last week’s big drop can be sustained.”

Nesbitt also expects considerable interest in weekly initial claims. “Claims fell sharply to only 360,000 last week and, if confirmation is seen in another low number this week, markets would have to take notice.”

On the earnings front, Alcan is slated to report on Tuesday, along with Suncor Energy. Imperial Oil reports on Wednesday, as does Jean Coutu Group. Thursday brings news from Aliant Inc., Canadian Oil Sands Trust, Richelieu Hardware and Tembec Inc.

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