When predicting whether the Bank of Canada will adjust interest rates there has been a long-standing rule of thumb.

The unwritten rule has been that when the bank's governor makes an adjustment in interest rates, he addresses the public by meeting the business media at a news conference to explain his actions.

In September the current bank governor Stephen Poloz surprised markets by breaking that rule. And there are some market watchers who are predicting he could do it again tomorrow.

Leaping loonie

Those who don't follow central bank closely may not know that all Bank of Canada interest rate policy statements are not created equal. At some, the governor and his deputy, Carolyn Wilkins, appear in public to answer questions about their reasons for their interest rate decisions.

Bank of Canada Governor Stephen Poloz held a recent news conference to discuss the Financial System Review but none is scheduled for tomorrow's rate announcement. (Chris Wattie/Reuters) On other occasions, the policy statement is released as a brief written document with no chance for a public Q & A session.

In September, Poloz fooled a lot of market traders by raising interest rates without scheduling a news conference. The evidence that markets were surprised was a sudden leap in the Canadian dollar.

As in the run-up to the September hike, this time around a majority of economists polled by financial wire services doubt interest rates will rise.

Fewer predicting a hike

While only a few are predicting the bank's target for the overnight rate will go from 1 per cent to 1.25 per cent, they include some well-known corporate names, including Moody's, Deutsche Bank, and Central 1 Credit Union, a payments processor for credit unions in B.C. and Ontario.

This time none of the big Canadian banks have added their voice on the side of a rate hike.

A collage of pictures showing economic activity in Alberta, where the jobless number fell again. Statistics Canada said it was mostly due to fewer people looking for work. (Gregory Bull/Associated Press, Alberta Innovates, McDonald's Canada, Mark Blinch/Reuters) In September it was different. Even economists at CIBC and Scotiabank were among those predicting an increase, and one of the reasons was a surprising economic number that had just come out the week before.

On the previous Thursday, Statistics Canada had revealed that the gross domestic product, the traditional indicator of economy activity, was growing at a rate of 4.5 per cent, half again faster than the U.S. economy.

As we wait for tomorrow's interest rate decision, market watchers are studying another surprising economic statistic. On Friday, the Labour Force Survey showed that in November, Canada's economy had created eight times more jobs than economists had been expecting.

That brought the total number of new full-time jobs created this year to 441,000. The unemployment rate unexpectedly fell to 5.9 per cent, the lowest level since the 2008 market collapse.

There are many, including economists at the OECD, who doubt the Canadian economy can continue to create jobs at this level. But a jump in the loonie following the November jobs report showed currency markets expect Canadian interest rates will continue to rise.

The question is when

The question, of course, is when a rise might come.

The governor himself has said an increase could happen anytime from December to late next year. And clearly currency traders saw strong jobs numbers as a warning that inflation could be brewing, leading the central bank to lift rates sooner than expected.

A traditional economic analysis says a tightening job market means employers must increase wages, leading to higher spending that eventually leads to higher prices — in other words, rising inflation.

There have also been news reports that statutory increases in the minimum wage will force sellers to hike prices. If so, that would contribute to higher inflation as well.

A sold sign on a house in Montreal. Recent home buyers and many in the real estate industry would rather not have an increase in interest rates. (Graham Hughes/The Canadian Press) In September, there was great discussion over whether the surprise quarter-point interest rate increase was needed at that time. Some suggested that the bank's rate hike was timed specifically to take advantage of the higher than expected GDP number.

The Bank of Canada has repeatedly said it wants to begin raising interest rates. But with core inflation weak, Poloz and company face a lot of flak from people in the real estate industry, and Canadians, weighed down by heavy borrowing, who would just as soon keep rates low.

Following the remarkable jump in GDP, it was harder to argue that rates should remain unchanged. By moving immediately, Poloz was able to execute the bank's longer term plan while voices of opposition where muted.

A vast majority of economists say it is unlikely, but there is some chance the governor could use the stunning increase in jobs to do something similar, taking the opportunity to raise rates a little before a cooling economy strengthens the hand of opponents. After all, he's done it before.

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