The Globe and Mail

Here's Allan Robinson's At The Bell which you'll find in Tuesday's newspaper:

Inflation pressures are building in North America, but don't look for the Bank of Canada to raise the target overnight bank rate today.

And south of the border, bond futures markets continue to extend expectations as to when the U.S. Federal Reserve Board will begin raising the federal funds rate because of the turmoil in the financial markets.

“A rate hike [today] is a very remote possibility at this point,” said Michael Gregory, a senior economist with BMO Nesbitt Burns Inc.

The Bank of Canada is expected to continue to weigh inflation pressures against the risks of a slowing economy. “Adopting an overt tightening bias would stoke expectations for a rate hike on Sept. 3, which we judge is premature given the downside risks,” Mr. Gregory said.

The tradeoff between inflation and an economic slowdown could take time to resolve. “We expect the Bank of Canada has now entered a protracted period of sitting on the sidelines and will not entertain serious thoughts of hiking rates until the second half of 2009,” said Charmaine Buskas, senior economics strategist for TD Securities Inc. “By that time, the Canadian economy will have gone through the storm and will be sufficiently strong to withstand higher rates.”

In part, the rising inflation risks in Canada reflect the inability of the dollar to rise despite lofty oil and natural gas prices. In the past, a strong dollar has lessened domestic inflation pressures.

“While the probability of a hike looks small, we expect a step up in hawkish rhetoric as well as some potentially ugly revisions to the Bank of Canada's inflation forecast,” said David Wolf and Carolyn Kwan, economists and strategists with Merrill Lynch Canada Inc. “The market, which is pricing in nothing from the Bank of Canada in coming months … is not prepared for this.”

Meanwhile, investors will not have to look far today to be reminded about inflation and economic pressures overhanging the U.S. market, and the ripple effects in Canada. Critical U.S. data scheduled for release today include the producer price index, advance retail sales and the New York state manufacturing index.

Also, investors will be closely monitoring Fed chairman Ben Bernanke's testimony today before the U.S. Congress about the U.S. mortgage crisis.