The Bank of Canada statement, Monetary Policy report with updated forecasts including tariff scenarios and Governor Tiff Macklem's opening remarks to his press conference all arrive at 9:45 a.m. ET on Wednesday, while the press conference starts 45 minutes later, said Scotiabank.

The BoC will probably cut rates by 25bps, predicted the bank. Consensus is unanimous and markets are priced for it. That makes it the easy thing to do, though Canada's central bank has surprised in the past.

A risk is that the BoC announces the end of quantitative tightening (QT) at Wednesday's meeting but the bigger likelihood is that Macklem just reinforces what Deputy Governor Toni Gravelle said recently, pointed out Scotiabank. Why deliver a speech on doing so sometime in the first half of 2025 if you aren't open to discussing it now, versus delivering the speech in March on the usual timeline it has used in the past.

The bank thinks this is a low probability versus doing so at a later date, but not zero.

Watch the possible United States tariff scenarios, advised Scotiabank. Macklem said they were being updated the last time he spoke at the December presser and they'll be presented with this MPR. One of the scenarios in July 2019 was a universal 25% tariff which they are likely to include again, along with other more targeted ones. They may break out with -- and without --retaliation unless the BoC is convinced retaliation is likely. In its 2019 scenario assumed retaliation and the full outcome was a peak impact on inflation after one year but persistence up to two years depending upon whether expectations are unmoored.

The money question in the presser will be to ask Governor Macklem whether there is uncertainty about the direction of the policy rate in tariff wars with and without retaliation. Could it go up or down, pointed out the bank.

On forward guidance, Scotiabank isn't expecting much if anything. The governor should just shrug his shoulders given the bidirectional risk of the policy rate under tariff scenarios. For now, if you don't know what will happen on tariffs and retaliation and you claim you don't act until it is fact, then don't pre-commit to doing anything now.

There are several reasons why the BoC shouldn't cut, added the bank. Its preferred core inflation gauges have been running at the 3%-4% month-over-month seasonally adjusted annual rate (SAAR) range for months, signaling ongoing residual inflationary pressure. This is despite modest slack that may either be too small to matter enough, or dominated by other inflation drivers, or nonexistent if potential GDP is overestimated.

Growth is modestly rebounding with Q4 tracking. Cooling labor force growth through immigration changes should tighten labor markets. Job growth is very strong in one-, three-, six- and 12-month horizons and it's hogwash that it's just public sector employment even if you accept putting such a filter on.

Consumption is performing reasonably well in three of the past four quarters as the rate sensitivity has lowered due to the rise of services. Growth excluding tariffs should pick up with lagging effects of past monetary easing, lagging effects of immigration, accelerating real wage growth, exaggerated effects of mortgage resets, pent-up demand and massive pent-up savings, pointed out Scotiabank.