Bank of America Global Research previews the June BoC policy decision on Wednesday.

"We expect the BoC to leave its policy rate unchanged at 2.25% on June 10 and to remain on hold through year-end as it assesses incoming data and monitors developments on the Iran conflict and the USMCA review. We also expect the BoC to underscore ongoing economic weakness, reflected in two consecutive quarters of contraction (Chart of the day) and a soft labor market. A negative output gap further argues against hikes, as it is helping keep core inflation contained," BofA notes.

"At the same time, we expect the BoC to acknowledge the risk that inflation could remain persistently high, driven by elevated oil prices. Forward guidance should reflect these risks with a cautious tone, while continuing to emphasize flexibility and adaptability as the effects of higher oil prices become clearer and the USMCA review progresses. Rates rallied and curve steepened in recent weeks as market priced out near-term hikes," BofA adds.