A Bank of Canada rate decision highlights the home side’s economic schedule this week, with economists predicting yet another hike. In the U.S., the data flow is modest, leaving market watchers likely focused on earnings.

Ahead of Tuesday’s rate decision, international securities transaction stats will be reported on Monday. After the Bank’s expected rate hike, wholesale trade and the leading indicator are out on Wednesday, and Thursday brings retail trade numbers.

“The Bank of Canada has likely had its mind made up to tighten again for some time, concerned as it is, with a shrinking output gap,” predicts CIBC World Markets. “Its second 25 [basis points] hike on Tuesday would restore a 75 bp gap over US Fed Funds — a spread supportive for the [Canadian dollar], and one we expect to be maintained through next year as both central banks find themselves with little work to do.”

RBC Capital agrees that a 25 bp hike is widely expected and just about fully discounted. “The key will be in the statement,” it says. “It will have to change from last time, given that the higher export and inflation results upon which the rate hike was pinned have since unwound somewhat. But the substance of the statement, implying further tightening likely lies ahead, should be unchanged.”

Beyond the statement accompanying the rate decision, BMO Nesbitt Burns notes that the Bank’s “thought process and the likelihood of another move in December will be more fully explored in the semi-annual Monetary Policy Report, which will be unveiled on Thursday. Overall, the tone may change somewhat, but the forecast should look very similar. Of more interest will be any commentary on the impact of the strong Canadian dollar and record oil prices.”

Apart from the rate decision, economists will be most interested in Thursday’s retail sales report. CIBC expects it to show “a tentative consumer”.

“Several specific factors likely weighed on the value of retail sales in August, including lower goods prices, weaker unit auto sales, poor weather and a late Labour Day. As a result, while underlying consumer spending retains the significant support of high employment rates and low interest rates, we look for a softer than consensus number here,” RBC explains.

BMO Nesbitt is looking for a small 0.2% drop in retail sales, with ex-auto sales only slightly firmer, up 0.1%.

In the U.S., the economic calendar is pretty sparse. On Tuesday, the consumer price index and housing starts will be out and Fed chairman Alan Greenspan will speak on mortgage markets and consumer debt at a bankers’ conference. Thursday will bring the leading indicator and the Philly Fed index.

CIBC says that September’s CPI report should show modest increases in both the headline and core rates, which should “provide additional assurance that oil’s rocket ride has yet to trigger broader inflation.”

“We look for the consumer price index to paint another benign inflation picture, despite the fact that core CPI probably rose 0.2% in September after three consecutive 0.1% readings,” comments BMO Nesbitt.

RBC sees the CPI report as important, noting, “The implicit driver of Fed policy is increasingly the price influences rather than the jobs backdrop. The risks to CPI appear to the upside; core prices rising more than 0.2% would likely prompt a bear steepening of the curve. However, should CPI again undershoot expectations, expect the curve to continue to flatten.”

CIBC suggests that “bond bulls will nonetheless be looking hopefully to Greenspan’s speech on Tuesday for further hints that the Fed may be prepared to pause in the not too distant future if oil prices cause greater economic damage.”

That said, CIBC suggests that the light schedule “will increase the tendency of markets on both the fixed income and equity sides to look to the anticipated deluge of earnings releases for direction.”

BMO Nesbitt confirms that this week will be the busiest week for corporate earnings releases. So far, about 15% of S&P 500 companies have reported. By the end of the week, that figure will rise to about 50%. The Dow will also have its busiest week, with 13 constituents due to report, bringing the total to 19.

“IBM and 3M kick off the week. Altria Group and McDonald’s report Tuesday, followed by Honeywell, JP Morgan Chase and United Technologies on Wednesday. And on Thursday, we get results from AIG, Caterpillar, Coca-Cola, Merck, Microsoft and SBC Communications,” it says.