March 18, 2014 / 3:48 PM / 4 years ago

Bank of Canada's Poloz sees softer growth in first quarter

OTTAWA (Reuters) - Canada’s economic growth rate likely slowed in the first quarter and inflation will also be softer in February than in January, Bank of Canada Governor Stephen Poloz signaled on Tuesday, although he expects both trends to improve over time.

Bank of Canada Governor Stephen Poloz takes part in a news conference upon the release of the Monetary Policy Report in Ottawa October 23, 2013. REUTERS/Chris Wattie

Poloz predicted the Canadian economy would grow by about 2.5 percent over the next two years. But he warned of limits to longer-term growth due not just to the effects of the financial crisis but also to demographics, particularly baby boomers retiring and the preference they have had to put savings into real estate rather than productive assets like stocks.

In the near term, he said, “the recent data suggest that the first quarter will be on the soft side. This mostly seems to be attributable to unusual weather, but it bears deeper analysis.”

In its January report, the bank projected 2.5 percent annualized growth in the first quarter, down from 2.9 percent in the fourth quarter. Most analysts now see growth at well below 2.5 percent.

As for inflation, he said most analysts are expecting data on Friday to show softer February inflation because of a sharp rise in prices in February 2013. Inflation had jumped to 1.5 percent inflation in January 2014.

“Looking through the short-term volatility, inflation still seems to be running at around 1.2 percent, give or take a tenth or two,” Poloz said in the prepared text of a speech he was giving in Halifax.

Reporting by Louise Egan; Editing by Randall Palmer

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