There isn't any doubt about what the Canadian central bank will do about interest rates — it's widely expected the bank will leave its key rate unchanged at one per cent.
But there is speculation about what the bank will have to say about raising rates in the future. And that means its statement Tuesday morning will be carefully scrutinized for small changes in wording.
"It sounds as if the bank may back away from their usual rote phrase that they could reduce monetary stimulus if the economy continues to grow above trend, with a very mild so-called tightening bias," said Doug Porter, deputy chief economist at BMO Capital Markets.
"There’s a chance that they will drop that phrase altogether."
In any event, Porter said BMO wasn’t expecting the Bank of Canada to do anything on rates for the next year anyway.
"(The wording is) so mild in any event and is qualified by the economy has to grow above potential and it hasn’t been doing that recently. So, there’s no chance of them tightening until the economy grows by more than two per cent and we haven’t seen that for awhile," he said.
In fact, the International Monetary Fund earlier this month said the Canadian economy will grow slower than expected, along with most of the rest of the global economy.
The IMF projected growth in Canada this year of 1.9 per cent, improving slightly to two per cent in 2013. That compared with the July forecast that saw growth at 2.1 per cent for 2012 and 2.2 per cent for 2013 with growth in Canada constrained by the sluggish U.S. economy.
"And frankly we still think the IMF is a touch too optimistic," added Porter.
The latest read on U.S. economic growth comes out Friday. The consensus calls for the American economy to have grown at an annualized pace of 1.8 per cent during the July-September period, better than the 1.3 per cent pace of the second quarter, but lower than the two per cent gain chalked up during the first quarter.
The Fed also makes its next announcement on rates this week and analysts aren't expecting much to come out of the meeting Wednesday, now that the Fed has made it clear it doesn't plan to move on rates until at least 2015 and has already announced a fresh round of quantitative easing to keep the recovery on the rails.
Timing also plays a part.
"Every meeting is important but now that we know they’re not doing anything about rates and have announced another round of stimulus, I suspect the Fed will do its level best to lay low here with the election just two weeks away from the meeting," said Porter.
The TSX gained 1.75 per cent this past week after falling a like amount the previous week. The Dow eked out a 14-point gain as U.S. indexes were pressured by earnings news.
The third-quarter earnings reporting season for Canadian corporations moves into gear this week, about two weeks after U.S. corporations started issuing results. So far, American companies seemed to have exceeded expectations.
A survey by Bloomberg said analysts now project a 0.3 per cent drop in S&P 500 earnings for the period, compared with a decrease of two per cent predicted on Sept. 28. Still, it's the first year-over-year decline since 2009.
Analysts aren't expecting a strong earnings season for Canada either.
"I think probably something that isn’t dramatic but then not a disaster either," said Fred Ketchen, manager of equity trading at Scotia Capital.
"Canadian companies for the most part are still taking in revenue, still making profits but they aren’t exciting and I don’t think this earnings season is going to be particularly exciting as we go forward."
Major companies reporting this week include Canadian National Railways (TSX:CNR) Monday, tech company Celestica (TSX:CLS) on Tuesday and gas producer EnCana (TSX:ECA) and telecom Rogers Communications (TSX:RCI.B) on Wednesday.
Thursday sees the heaviest day with earnings coming in from gold producers Agnico Eagle Mines (TSX:AEM) and Goldcorp Inc. (TSX:G), energy companies Cenovus Energy (TSX:CVE) and Nexen Inc. (TSX:NXY) and Shaw Communications (SJR.B).