OTTAWA - The Bank of Canada says the Canadian economy has weakened more than expected in the second quarter and is unlikely to meet the bank's tepid 0.8 per cent growth prediction.
The central bank also said that falling oil prices will mean that inflation may not be as big a problem as it projected in July.
The two revised forecasts contained in a noon speech by deputy governor David Longworth suggests the central bank may be setting the stage for lower interest rates in the future to stimulate the economy.
The bank's next interest rate announcement is Sept. 3, but few economists expect governor Mark Carney to act as quickly as that.
Longworth says second quarter GDP, which will be released by Statistics Canada on Friday, will be weaker than was expected in July, but did not suggest the economy contracted.
The economy shrank by 0.3 per cent in the first quarter and a second quarter retreat would mean Canada had fallen into a technical recession during the first half of 2008.
