UPDATE 2-Bank of Canada cuts Q3 growth forecast as exports sluggish

Tue Oct 1, 2013 2:33pm EDT
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* Macklem sees growth range of 2-2.5 pct for Q3 and Q4

* Says rates stay low to aid export, investment recovery

* Says growth of 2.5 pct needed to absorb economy's slack

By Leah Schnurr

TORONTO, Oct 1 (Reuters) - The Bank of Canada cut its third-quarter economic growth forecast sharply on Tuesday and said the crucial export sector might recover more slowly than expected, making clear interest rates will remain low until the outlook improves.

Senior Deputy Governor Tiff Macklem said the central bank now expects annualized growth in the third and fourth quarters to be in the 2 to 2.5 percent range before strengthening next year. In its monetary policy report released in July, the bank said third-quarter growth would be 3.8 percent and fourth-quarter growth would be 2.5 percent.

"Near-term growth now looks a little less choppy than initially projected," Macklem said.

The bank's July projections overestimated the second-quarter impact on growth of severe flooding in Alberta and a construction strike in Quebec, both in June. The economy grew 1.7 percent in the second quarter, compared with the bank's estimate of 1 percent.   Continued...