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Economic data may slow future BoC rate increases

By Albert Van Santvoort for Business in Vancouver

When the Bank of Canada (BoC) governor woke up this morning, there’s a good chance he was disappointed when he set his eyes on the most recent round of Canadian economic data.

“There is no denying that the narrative on the BoC policy outlook suffered an unexpected setback with this morning’s data,” said Derek Holt, vice-president and head of capital markets economics at Scotiabank, in a note to investors.

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Year over year, inflation in May was 2.2%, 0.4 percentage points lower than the expected 2.6%.

Canadian retail sales unexpectedly declined sharply in April by 1.2%. This was significantly below Scotiabank’s projection of a 0.1% increase. The main driver of the fall in retail sales was a 4.3% decline in motor vehicle sales. Retail declines were spread across six provinces, concentrated mostly in Ontario and Quebec.

Despite the disappointing numbers, Holt highlights that he would avoid claims that the central bank is considering changes to its plans to raise interest rates later this year.

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