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The Bank of Canada building in Ottawa.

CHRIS WATTIE/REUTERS

The Canadian economy is getting just a tiny bit weaker, which means that that interest rate hike the Bank of Canada keeps threatening is getting just a bit further away. Tuesday's rate announcement may acknowledge that fact, which might actually have some market impact.

Unless Mark Carney feels like doing something really wild and playing with the markets before he leaves for the Bank of England, Canada's central bank is going to leave interest rates exactly where they are. It is what it has done for what seems like forever now, and there is really not a possibility of anything else.

In many ways, the BoC probably wants to increase interest rates. After all, the Canadian housing market is solid in most of the country, and out of control in some places. Rock-bottom interest rates are not helping to slow it down. Household debt is far too high, pretty much everywhere.

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It is time for a rate hike, for many reasons -- except that it is not time for a rate hike at all, for a lot more reasons.

Top of the list is the international situation, particularly the mess in Europe. We've gotten too used to headlines about Greece on the verge of collapse -- but the truth is that the situation there could spill over into the international economy in a much bigger way at any time. The U.S. is looking a bit better, but not strong enough to lift the world, and that's without even talking about the fiscal cliff. And China and the rest of Asia are no longer punching above their weights.

But global economic weakness is an old story: Canada is weakening too. The gross domestic product report released on Friday showed that the Canadian economy only expanded by 0.6 per cent in the third quarter, well below the 1 per cent (itself a weak number) expected. The details of the report – and in particular some real weakness in exports from Canada – were not particularly reassuring either, nor was the fact that GDP was flat in September. That means that the fourth quarter is not likely to be particularly robust. If you check the last issued forecast from the Bank of Canada, you see that they were looking for growth of 2.5 per cent in the last quarter of 2012. Although that is not impossible, it would be a pretty hard number to hit at this point.

An acknowledgement that Canada itself is weakening could be the something new that gets everyone's attention in this BOC statement. It will be carefully worded, of course, but everyone will get what it means: no rate hike for a while, maybe a long while. Last time around, the BOC did adjust the language just a bit too, throwing in the words 'over time' to flag that the 'withdrawal of monetary stimulus' (translation: a hike in rates) will not happen soon.

A 'dovish' statement is likely to put some downward pressure on the Canadian dollar, which would be fine with the BOC too. Last time around it made a reference to the loonie's strength, which worked nicely to stop speculators from bidding it up even higher. This time around, they may be able to actually talk it down a notch.

So do not look for any big surprises tomorrow, because that's not how our central bank likes to do things. A few tweaks in wording though may be all the signal anyone needs that the economy is slowing and rate hikes are being slowed too.

Linda Nazareth is the principal of Relentless Economics and senior fellow for economics and population change at the Macdonald Laurier Institute. Visit her at relentlesseconomics.com

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