As expected, the Bank of Canada recommitted yesterday to leaving its benchmark interest rate at a record low of 0.25% through to the middle of next year.

The central bank is taking a brighter view of the economy, citing stronger-than-expected household spending. Policymakers said that Canada’s GDP would shrink 2.3% this year, compared with an earlier estimate in April that the economy would contract 3%. GDP will expand 3%, compared with an earlier call for growth of 2.5% next year, the BoC said in its latest policy statement.

The revisions reflect what the central bank said are “increasing signs that economic activity has begun to expand in many countries in response to monetary and fiscal policy stimulus and measures to stabilize the global financial system.”

Still, the BoC called the recovery “nascent” and emphasized that “effective and resolute policy implementation remains critical to sustained global growth.”

Canadian retail sales rose much more than expected in May after a surprise drop the previous month, Statistics Canada said today.

Sales increased 1.2% during the month to $34 billion, with gains in seven of eight sectors, led by a 2.4% increase in automotive products, the federal agency said.

“Retail sales have been generally rising since the beginning of 2009,” Statistics Canada said.

Most economists had expected sales to rise by just 0.5% in May after a 0.6% decline in April. – Financial Post

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