The guessing game about when Bank of Canada Governor Mark Carney will start to lift borrowing costs essentially involves two camps.
The main difference between them is each group's interpretation of Mr. Carney's year-old "conditional" pledge to keep his benchmark interest rate at a rock-bottom 0.25 per cent through the end of June, depending on the inflation outlook.
For the first camp, the term "conditional" was always exactly that.
What Mr. Carney has called "extraordinary guidance" to markets was never meant to box him into staying on hold any longer than he felt appropriate, they say. So a rate hike before his July 20 decision is and was always in the cards.
When Mr. Carney added the term "expressly" before conditional in a speech last month, he added more fuel to speculation that he'll start tightening before July.
The second camp argues while Mr. Carney's commitment was rhetorically conditional, central-bank credibility requires him to stick to it, even though his preferred inflation gauge is already a shade above his 2-per-cent target. For this crowd - which has dwindled - Mr. Carney or a future governor would find it hard to influence markets later on with a similar conditional pledge should he break what they insist was a promise.
Besides, they reason, Mr. Carney could simply start with a bigger, 50-basis-point hike in July instead of the typical 25 basis points and have pretty much the same impact on the economy over the longer haul as he would by moving sooner. (A basis point is 1/100th of a percentage point.)
WAVE OF DATA
A slew of data this week could help decide which side is closer to being right, since it will emerge as the central bank puts the finishing touches on its most significant quarterly forecast in a long time, set for release on April 22. Many economists predict upward revisions to the bank's projections for inflation and growth, as well as for the all-important U.S. economy.
On Monday, the bank releases its quarterly survey of business conditions in the country. Statistics Canada publishes the latest trade data Tuesday followed by manufacturing shipments on Friday. Taken together, those indicators will paint as clear a picture as any of how much slack is left in the rapidly rebounding economy, and how confident firms ought to be about their sales and hiring prospects in an era of dollar parity. The biggest of the three is the Bank of Canada survey, which includes a question on how companies see inflation playing out.