The likely deceleration this year is expected to be a consumer-led trend.

“Greater conviction in this has also led the BoC to cut its inflation forecast,” TD said. “With the belief that the economy is on the path to price stability, the BoC can now step to the sidelines and let its restrictive policy filter through the economy.”

This guarded stance will almost certainly define the central bank’s strategy this year, barring a few adjustments from unexpected swerves.

“Though [the BoC] does have the option to hike again should inflation prove uncooperative, we are expecting it to hold rates at this level for most of 2023, before cutting at the end of the year to drive a better balance between interest rates being too far in restrictive territory and a weakening economy,” TD concluded.