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Steady-as-She-Goes Canadian Economy Backs Cautious Rate Stance

  • April data shows no sharp pick-up in underlying inflation
  • Overall growth was better-than-expected in first quarter
Workers inspect looms at a factory in Granby, Quebec, Canada.
Photographer: Christinne Muschi/Bloomberg

Canada’s economy continues to show signs of strength, but not enough to fuel inflation and prompt aggressive rate hikes -- a scenario that validates the Bank of Canada’s cautious stance on monetary policy.

Inflation figures Friday by Statistics Canada showed few signs of any sharp pick-up in price pressures even as the economy operates near its full capacity and gasoline prices are rising. A separate retail sales report showed signs of life from consumers, who had been scaling back recently. The pair of releases adds to a run of data -- including an unexpected jump in both imports and exports -- that underscore demand remains solid.