The Bank of Canada is widely expected to hike rates by 50 basis points on Wednesday but what comes next is less clear.

The market is pricing in an 80% chance of another 50 bps in July but will be watching closely for signals from Governor Tiff Macklem.

Economists at Laurentian Bank note that this will be the first back-to-back 50 bps hike since 1998 but it's underpinned by a strong economy. Tomorrow's Canadian GDP report is forecast to 5.2% annualized growth, which is above the 3% BOC projection. Higher energy prices are both a tailwind for growth and inflation.

That said, they think the peak of price acceleration is in.

"Assuming no other supply side shock to the economy, we are of the view that inflation likely peaked in April and should start to moderate over the coming months, decelerating from 6.8% in April to 5.5% by year-end," economists write in a report today.

Going forward, they expect rising rates to hit harder and faster than normal, with "at least a modest price pullback" in home values.

"This should lead the BoC to pause eventually in the later stages of 2022. Subject to change, we see the hiking cycle ending at 2.75% in 2022Q4," they write.

If at that time the economy falters and price pressures reverse, a rate cut "could be necessary down the road."

USD/CAD is down 66 pips to 1.2660 today.