Canadian December consumer price index fell 0.4 month over month and rose 1.8% year over year, noted Scotiabank.

Market pricing for next week's Bank of Canada policy decision, however, increased by one to two points to being over 80% priced in favor of a cut, said Scotiabank. The BoC's policy meeting is on Jan. 29.

The bank doesn't believe that the BoC should cut but it may well take the easy route in what's priced. Jobs are ripping.

Core inflation remains unacceptably "warm," stated the Scotiabank. All of the BoC's survey measures of inflation expectations are at or above the upper limit of the 1%-3% inflation target range.

Q4 gross domestic product growth is tracking close to 2% quarter-over-quarter seasonally adjusted annual rate using monthly GDP accounts and possibly more on an expenditure accounts basis. Consumption is rebounding including in per capita terms.

United States tariffs loom and all signs point to strong Canadian retaliation that would add to underlying price pressures. The BoC is already at or very close to a neutral rate by contrast to the Federal Reserve.

The U.S. Federal Reserve is waiting it out at 125bps above the BoC. The Canadian dollar (CAD or loonie) is a lepper in foreign exchange markets threatening to push into the 1.60s in a tariff and retaliation scenario.

Scotiabank reiterated wouldn't cut at this point while leaving all options open going forward.