The Bank of Canada is set to raise its overnight rate another 25 basis points this week, bringing it to 3.75%, suggests TD Bank. It also expects the Bank to be coy about future rate moves.

The bank suggests that this week’s decision is essentially a slam-dunk. “Markets are fully pricing in the move, and analysts are unanimous on the Bank’s decision as well,” it says. “The real issue is not the decision itself. It’s what the Bank will say in its press release, and whether there are more moves to come.”

“On that front, we would be surprised to see the Bank commit strongly to any specific outcome,” it says. “Mr. Dodge will want to leave all his options open. In other words, the course of policy will be heavily data-dependent – contingent on how well the economy fares relative to the Bank’s own expectations, and contingent on the path of the Canadian dollar, which has gone on another tear.”

At this stage, TD is sticking with its view that the overnight rate will top out at 4.0%, and the underlying momentum in the economy alone would suggest that the risks are more heavily skewed to three rate hikes rather than just one more. “However, the Canadian dollar is increasingly becoming a wild-card in that assessment,” it notes. “If the loonie continues to power ahead, and continues to appreciate strongly on the back of U.S. dollar weakness and speculative activity – as it has over the past few days – all bets could be off.”