* BoC says no immediate plans to expand money supply
* Markets surprised, Canadian dollar and bond yields rise
* Any additional easing to be announced on fixed dates
* Recession worse than expected, some positive signs
* G7 countries slow in dealing with toxic assets (Recasts, updates throughout with Carney's comments)
By Louise Egan
OTTAWA, April 23 (Reuters) - The Bank of Canada stunned markets on Thursday with a go-slow approach to injecting additional stimulus into the slumping economy after cutting its benchmark interest to almost zero and predicting the biggest first-quarter contraction on record.
While encouraged by central banks' successful efforts in the United States, Britain and elsewhere to buy securities and thus expand the money supply, Canada signaled it would not follow suit before June -- and maybe not even then.
The Canadian central bank unveiled a framework for quantitative easing, or creating money through purchasing financial assets, and credit easing, which involves help for targeted private-sector credit markets.
But Governor Mark Carney said this was mainly an exercise in transparency to assure Canadians that the bank could do more to boost lending, if needed, chilling market expectations that more easing was imminent.
The bank won't take extra steps unless there are new external shocks to the financial system in coming months, he said.
MORE EASING IS A "BIG IF"
The bank cut its overnight rate to 0.25 percent on Tuesday for a cumulative reduction of 4.25 percentage points since late 2007, and it promised to keep the rate at 0.25 percent until mid-2010.
"If there were need to do something else, which is a big if, but if there were a need to do something else, we would look to communicate that at our regularly fixed announcement date," Carney told reporters after the bank released its quarterly outlook.
The Canadian dollar and bond yields rose as it became clear that the bank would take no immediate steps. Markets had priced in some easing, despite central bank signals to the contrary.
"The market's disappointment is that there are no commitments to buy anything or even the suggestion of any particular products aside from an offhand reference to bills and short-dated government bonds," said Eric Lascelles, chief economics and rates strategist at TD Securities.
Lascelles now sees a 25 percent possibility that the Bank of Canada will engage in some form of unconventional easing. He he saw a 60 percent chance before the report.
The price of the benchmark 30-year bond was down C$1.00 at C$120.05 to yield 3.778 percent. It had been down just 14 Canadian cents before the report.
The Canadian dollar rose to C$1.2261 to the U.S. dollar, or 81.56 U.S. cents, from C$1.2360, or 80.91 U.S. cents, just before the release.
EXCEPTIONAL CIRCUMSTANCES
The bank said it will advise of any intentions to buy securities at its scheduled rate announcements, the next one being June 4. It would also announce the size of purchases it would make until the next fixed date.
It said it would only announce new policy measures in between set announcement dates in "exceptional circumstances."
Now that it can no longer cut rates, it listed three tools that could help lower longer rates and boost lending.
--an explicit commitment to not raise its overnight target rate for a specific period, the step it took on Tuesday.
--"credit easing," or buying private sector assets in certain impaired credit markets, which would not necessarily expand the money supply.
--"quantitative easing", in which it would create more money by buying government or corporate bonds.
Carney revised forecasts for the Canadian economy down, largely because of delays in the United States and Europe in extracting toxic assets from banks.
"If we had to boil it down to one issue, it's the slowness with which other G7 countries have dealt with the problems in their banks," he said.
The economy shrank by an annualized 7.3 percent in the first quarter -- the worst on record, the bank projected. The recovery will begin in the fourth quarter, it said.
Despite positive signs, including stronger Asian demand and some firmer Canadian data, the overall weight of economic data in Canada will be "net negative " for the next six months, Carney said. (Additional reporting by Randall Palmer, Frank Pingue, Jennifer Kwan and Ka Yan Ng; editing by Janet Guttsman)