(Adds more comment) TORONTO, March 2 (Reuters) - Canada’s economy grew at annualized rate of 9.6% in the fourth quarter, following record fluctuations in the previous two quarters, Statistics Canada said on Tuesday, while December’s real GDP edged up 0.1%. Canada’s economy is expected to grow by 0.5% in January, Statistics Canada said in a preliminary estimate. Analysts had expected fourth quarter annualized growth of 7.5%, with December GDP at 0.3%. STORY: MARKET REACTION: CAD/ LINK:here COMMENTARY: DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS AT SCOTIABANK “The combination of the Q4 beat and the strong gain in January in lockdown continues to position the Bank of Canada in catch-up mode on its forecasts. Remember they’ve been playing catch-up on Q4. The October MPR they had 1% contraction for the fourth quarter, and then in the January MPR they revised that up to 4.8% and now we’ve just got 9.6%. So they’re being blown out of the water in terms of their growth forecasting - the way the year ended and transitioning into the new year. The Bank of Canada is behind the curve on Q4 and the start of Q1.” “I think they’ll find it difficult to stay on hold (with interest rates) as long as they are guiding.” “(Tiff) Macklem just repeated that the output gap won’t close until 2023... We have (the output gap) closing by the end of this year or possibly early next year, so far ahead of the Bank of Canada. We have inflation therefore a little bit above target as we get into the back half of next year. So that’s why we think the bank hikes in the second half of next year.” NATHAN JANZEN, SENIOR ECONOMIST, ROYAL BANK OF CANADA “The headline for Q4 was stronger than was expected. Growth slowed in December but stayed positive, up a tenth and the January flash estimate of up half a percent was on the stronger side relative to expectations. So this is confirming that the economy has on balance continued to grow through the second wave of virus spread and containment measures.” I think they (the Bank of Canada) will be encouraged that the economy is showing some resilience. I don’t know if that changes the calculus in the very near term. There had been speculation already that they would start to taper the quantitative easing purchases, at least announce that as soon as April. This just makes it more likely.” DOUG PORTER, BMO CAPITAL MARKETS CHIEF ECONOMIST “There are a lot of moving parts here but overall I would say this is generally better than expected. ... The fourth-quarter was a couple percentage points better than really anyone expected, and I would just remind everyone, if we went back a few months I don’t think anyone was even looking for 5% growth let alone almost 10% growth in the fourth quarter.” “The other big pleasant surprise is the early read on January. It’s mildly disappointing but not surprising that December’s monthly number was revised down a bit given some of the other indicators. But this early read on January, if it’s even close to correct, is very good news. Given schools were closed in many jurisdictions, we still had pretty severe shutdowns in Ontario for one, so if the economy did indeed manage to grow by a half-percent in January, that’s a great starting off point for 2021.” “It suggests that economy is dealing with this second set of restrictions much better than I think most expected.” (Reporting by Jeff Lewis, Fergal Smith and Steve Scherer Editing by Denny Thomas)