The markets and analysts see a chance for the Bank of Canada to hike rates again on Wednesday after becoming the first major central bank to pause its monetary tightening campaign in January.

About two-thirds of economists polled by Reuters last week expect the central bank to keep rates on hold this year, but a handful forecast a hike on Wednesday and three-quarters said there was a risk of at least one increase in June or July.

Money markets see a 46% chance of a hike of 25 basis points and are fully pricing one in for the July 12 meeting. The Bank of Canada (BoC) will announce its decision at 10 a.m. ET (1400 GMT).

Jay Zhao-Murray, FX market analyst at Monex Canada, expects a hike of 25 basis points after the bank signaled the possibility of higher rates several times in recent months and as statistics show the economy running stronger than expected.

"The data clearly favors one side of the argument more than the other," Zhao-Murray said. "The longer you spend waiting, dilly dallying ... that is more time for these high inflation expectations to get deeply embedded."

Between March 2022 and January, the BoC increased rates eight times to a 15-year high of 4.50% - the fastest tightening cycle in the bank's history. In April, annual inflation accelerated for the first time in 10 months to 4.4%, more than double the BoC's 2% target.

And the steep increase in borrowing costs failed to cool an overheating economy, with first-quarter GDP rising 3.1% - versus the 2.3% forecast by the BoC - and April seen expanding 0.2%.

The recent recovery in Canada's housing market is also putting pressure on prices.

"The firmer growth backdrop and a rebounding housing market will turn up the heat on the Bank of Canada," Doug Porter, chief economist at BMO Capital Markets, said in a note. "We suspect that they will opt to hold steady for now, but send a very loud message that their tightening bias is intact."

BoC Governor Tiff Macklem in January said a pause was needed to assess the impact of the previous tightening.

But at its last meeting in April, the governing council discussed raising rates, according to the minutes, and Macklem has repeatedly said that a hike was possible if inflation did not ease as expected.

The BoC forecasts that inflation will slow to 3% this summer and then slowly come down to its 2% target by the end of next year. (Reporting by Steve Scherer; Editing by David Ljunggren and Mark Porter)