After the last long weekend of the summer, Canadian market watchers face a busy week, highlighted by a Bank of Canada meeting, which is expected to produce a hike in interest rates, on Wednesday.

Markets were closed on both sides of the border for Labour Day on Monday, leaving Canadian markets to pack a week’s worth of data into just four days. The U.S. schedule is much lighter.

On Tuesday, Canada gets building permit data for July and the Ivey Purchasing Managers’ Index for August. But, the big event of the week will be Wednesday’s rate-setting decision, with economists agreeing that a hike is likely. August housing starts, and second quarter capacity utilization numbers, are released on Thursday. And, the data flood continues Friday with a jobs report and merchandise trade data.

The consensus on the rate meeting is a 25 basis point hike by the Bank to 2.25%. Although, some have suggested that a 50 bp hike may be warranted.

National Bank Financial sees a 25 bp move, as does CIBC World Markets. “A nearly-fully-anticipated quarter point Bank of Canada hike will, by necessity, also have to be accompanied by an upbeat economic statement that traders will see as somewhat hawkish,” CIBC predicts.

TD Bank agrees, saying that it believes a 25 bp move is “fully justified”. But it doesn’t believe a move is a done deal, saying the U.S. economic soft patch remains a risk. “Even if the Bank of Canada is probably of the view – like the U.S. Fed – that the weakness in the U.S. economy is temporary, it cannot just shrug aside the risks. That is why next week’s decision is not a pure and simple slam-dunk.”

“All in all, a 25-basis-point move on Wednesday would be the prudent course of action to take – and we believe that the odds favour such a move,” TD concludes.

BMO Nesbitt Burns is also tentative in its call, saying, “A move on [Wednesday] looks to be a sure thing, but it might be prudent for the Bank to consider Oct. 19 as the first action date in order to get a better sense on how vigorously the U.S. economy is emerging from its soft patch.”

Beyond the Bank, CIBC says that “the other key marker for the week will be employment, which we have no reason to see as much out of line with the year to date average. Elsewhere, look for a roughly flat month for housing starts, and a shrinkage in the trade surplus from a downward-revised June, early signals of a slower pace to GDP growth in Q3.”

BMO Nesbitt says that the Canadian economy probably churned out a steady 16,000 jobs in August, after a very modest 8,700 positions were created in July. “A turnaround in full-time jobs would go a long way to help build confidence in the view that domestic demand will boost Canadian economic growth in the second half of the year. A likely drop in part-time positions will offset some of the full-time gains. The jobless rate is expected to remain at a 7.2%,” it notes.

In the U.S., the only data due in the week isn’t out until Friday. On Wednesday, Fed chairman Greenspan is slated to testify to Congress, and the Beige Book is to be released. It’s not until Friday that the Producer Price Index for August and trade balance for July are released.

“In the US, the central bank chairman’s testimony tops the agenda, and it’s clear what his tone will be: ‘Alan Greenspan is bullish on America.’ It has to be so, given the political damage to the Bush campaign should he say anything else,” CIBC says. “While the payrolls data were by no means stellar, they were enough to let Greenspan stick to his story that the “soft patch” was temporary, a message that suggests we will see a quarter point Fed hike in September.”

CIBC also predicts that the Beige Book and trade data will also look a bit better.

“Oil is going to gush all over next week’s data,” BMO Nesbitt predicts. “Average oil prices rose 10.4% in August after advancing 7% in July. This will boost the headline inflation measures for import prices and producer prices, and inflate the value of imports.” Producer prices are expected to rise 0.4% in August, but a slower 0.2% on the core rate, it says.