Bank of Canada seen holding rates as inflation, weak growth pull in opposite directions

GDP growth has been uneven. The economy entered a technical recession at the end of March but rebounded strongly in April, suggesting there is little need for additional monetary stimulus.

"Even with the high oil prices that we saw earlier in the year, we haven't seen any material evidence of pass-through into underlying inflation," said Randall Bartlett, senior director of Canadian Economics at Desjardins Group.

"And then on the downside, there's really just a lot of uncertainty as to where trade is going," he said.

Although Canada's economy has weathered U.S. sectoral tariffs imposed since last year, uncertainty over trade policy and the future of the North American Free Trade Agreement continues to weigh on business investment and hiring.

With inflation remaining above target while economic growth remains subdued, economists say the case for leaving interest rates unchanged is stronger than that for either a hike or a cut.