KINGSTON, Ontario (Reuters) - Bank of Canada Deputy Governor David Longworth said on Tuesday that economic growth in Canada was likely somewhat weaker than expected in the second quarter, while inflationary pressures are probably lower than previously thought as oil prices have fallen.
Longworth, in a speech prepared for the Canadian Association for Business Economics, gave no hint that the central bank had changed its bias to keep interest rates on hold for now.
The bank signaled at its last policy setting decision, on July 15, it would hold rates steady at 3 percent at its next scheduled adjustment on September 3.
In its Monetary Policy Report Update on July 17, the bank raised its forecast for second quarter growth to 0.8 percent from a previous projection of 0.3 percent, but in his speech, Longworth played down expectations.
“Recent data ... suggest that Canadian GDP growth in the second quarter was likely somewhat weaker than expected,” Longworth said in his speech.
Statistics Canada is scheduled to release second quarter GDP figures on Friday.
Longworth said he continues to expect that both total inflation and core inflation, which strips out volatile food and energy prices, will converge on the bank’s 2 percent inflation target in the second half of 2009.
The bank said in July that total inflation would continue rising to peak at 4.3 percent.
“However, the recent decline in the spot and futures prices of energy means that the temporary spike in total CPI inflation between now and the first quarter of 2009 should be lower than projected in the July Update,” he said.
Reporting by Louise Egan, writing by John McCrank