Although the Bank of Canada appears poised to hike interest rates next, National Bank Financial doesn’t expect the central bank to embark on a prolonged tightening campaign.

“As most pundits continue to marvel at the resilience of the Canadian economy in the face of rising energy prices and a strong currency, expectations are for the Bank of Canada to keep on raising interest rates,” NBF notes.

However, it says, “Even if a rate hike on October 18 appears to be a foregone conclusion, we remain of the opinion that this tightening campaign will not be long.”

“Indeed, for all the talk about Canada’s strong labour markets, people tend to forget that construction finance and real-estate have accounted for 46% of the 362,000 jobs created since 2004 — i.e., almost four times their normal share of total employment. In other words, our labour market could turn out to be a lot more interest-sensitive than our central bank is currently assuming,” it cautions. “This, at a time when economic momentum is already waning.”

It points out that data released last Friday by the OECD showed Canada’s leading economic indicator plunging 1.6% in August, the largest decline in a decade.