Bank of Canada says economy weaker than expected, frets over oil

TORONTO, Dec 6 (Reuters) – – Bank of Canada Governor Stephen Poloz on Thursday said the economy was weaker than forecast and predicted low oil prices would cut growth, comments likely to reinforce market expectations that the pace of future rate hikes will ease off.

Poloz – speaking a day after the central bank kept rates on hold – repeated that more tightening would be needed to keep inflation on track but added that the pace would be decidedly data-dependent.

“It is fair to say that the data released since our October Monetary Policy Report have been on the disappointing side … the economy has less momentum going into the fourth quarter than we believed it would,” Poloz said in speech in Toronto.

Poloz said much of the bank’s discussion ahead of the interest rate announcement on Wednesday had been focused on oil. Prices for crude – one of Canada’s main exports – are sinking amid a supply glut and this is hitting Alberta, the western province which is home to the domestic industry.

“It is already clear that a painful adjustment is developing for Western Canada and there will be a meaningful impact on the Canadian macro-economy,” said Poloz.

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