04:20 PM EDT, 04/15/2025 (MT Newswires) -- The Toronto Stock Exchange posted a third-straight gain on Tuesday, buoyed by lower than expected March inflation data but leaving observers divided on whether or not the Bank of Canada will cut its key benchmark interest rate again tomorrow.

The S&P/TSX Composite Index closed up 201.4 points at 24.067.93, adding more than 1,000 points over the past three sessions, but leaving the index more than 1,200 point under the April 2 record high. Among sectors, Telecom was the sole decliner, down 0.42%, with Information Technology and Health Care the biggest gainers, up 1.87% and 2.37% respectively.

The TSX did dip modestly after White House Press Secretary, Karoline Leavitt, during a Tuesday afternoon briefing revived talk around Canada becoming the 51st state of the United States, comments that are seen as a threat to this nation's sovereignty, while also playing down reports that U.S. President Donald Trump was thinking about putting a pause on tariffs for the auto industry, which is a key part of the Canadian economy.

But that dip was short lived as Canadians re-focused on domestic matters, digesting today's CPI data and awaiting tomorrow's central bank meeting.

Following the inflation data, the interest-rate swaps market, which captures investor expectations around monetary policy, was suggesting it's a coin-flip outcome over whether the BoC will cut rates again or hold them steady at 2.75% on Wednesday, according to LSEG data, the Globe and Mail noted. If the central bank opts to cut it would be the eighth consecutive rate cut since last summer.

David Doyle, head of economics at Macquarie, noted inflation moderated in March, driven by lower prices for gasoline and travel. Headline CPI was unchanged month over month and decelerated to 2.3% annualized. Trim/median moderated MoM to an average of 0.14%, the lowest reading since Feb-24. Year over year, these remain elevated at 2.85%.

Doyle said further downward pressures are likely on CPI near-term. He noted the consumer carbon tax was removed in April, and added this could lead to a drop of 0.5 percentage points or more in YoY CPI for the month with much of this flowing through the gasoline price.

Macquarie's BoC outlook is unchanged on today's CPI release. As outlined yesterday in its Bank of Canada preview note, Macquarie said while "not an open and shut case", it continues to see a 25 bps rate cut tomorrow and further rate cuts of 25 bps in each of June and July. This would take the overnight rate down to 2.0%.

Desjardins also said Canadian central bankers face a difficult decision this week. It noted while tariffs and market volatility will slow the economy, policymakers are concerned that the global trade war could unleash another wave of inflation. As a result, Desjardins believes the BoC will opt to hold its policy rate steady Wednesday. "That forecast was made easier by recent Bank of Canada communications which outlined a revised reaction function for this unusual environment."

According to Desjardins, key to understanding the BoC's willingness to hold off making any changes to interest rates tomorrow is knowing the central bank is also willing to act "quickly when things materialize." So, if by June or July, the hard economic data deteriorate and both inflation and inflation expectations look more tame, Desjardins thinks monetary policymakers will be debating whether to cut 25 or 50 basis points ahead of each of the announcement dates. It is reiterating its call that the BoC reaches a terminal rate of 1.75% later this year, given the additional headwinds from slower population growth and mortgage renewals.

Meanwhile, Desjardins said its models suggest there is little reason to expect the BoC to revise its estimated neutral rate range of 2.25% to 3.25%. Desjardins said: "While rising forecasts of the U.S. neutral rate will put upward pressure on the Canadian neutral rate, slower domestic population and productivity growth should provide an offset. As a result, we are relatively neutral on the neutral rate."

Of commodities, gold traded at a record high late afternoon on Tuesday even as the dollar rose and treasury yields stabilized after last week's market turmoil amid a tariff battle between China and the United States. Gold for June delivery was last seen up $21.40 to US$3,247.70 per ounce, topping Friday's record close of US$3,244.60.

But West Texas Intermediate crude oil closed with a small loss on Tuesday after the International Energy Agency (IEA) slashed its 2025 demand-growth forecast on slowing global growth amid U.S. President Donald Trump's tariff wars. WTI crude oil for May delivery closed down $0.20 to settle at US$61.33 per barrel, while June Brent crude was last seen down $0.22 to US$64.66.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.