* Loonie steadies near 2-1/2-month low

* Weakens 1% in February

* Canadian economy grows by 1% in Q4

* Bond yields ease across a flatter curve

TORONTO, Feb 29 (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Thursday as domestic data showed the economy staying out of recession, with the currency steadying after it hit a 2-1/2-month low the day before.

The loonie was trading nearly unchanged at 1.3570 to the U.S. dollar, or 73.69 U.S. cents, after touching on Wednesday its weakest intraday level since Dec. 13 at 1.3605.

For the month, the currency was down 1%, due in part to broad-based gains for the U.S. dollar.

The Canadian economy expanded at an annualized rate of 1.0% in the fourth quarter, avoiding a second straight quarterly contraction. The growth was stronger than the Bank of Canada had expected but failed to impress some analysts, especially when considering strong population growth in Canada.

"The economy still looks like it's softening," said Nathan Janzen, assistant chief economist at Royal Bank of Canada. "Per-capita GDP is still declining, the unemployment rate has increased, job openings are falling (and) there is some signs of moderation in wage growth."

The Canadian central bank is forecast to cut its benchmark interest rate in June, according to a majority of economists polled by Reuters who said the greater risk was the first reduction would come later than they expect rather than earlier.

Money markets are also leaning toward June for the first rate cut and expect three quarter-point moves in total this year.

U.S. data showed prices picking up in January amid strong gains in the costs of services, but the annual increase in inflation was the smallest in three years, keeping a midyear rate cut from the Federal Reserve on the table.

Canadian government bond yields moved lower across a flatter curve, tracking moves in U.S. Treasuries. The 10-year was down 2.4 basis points at 3.500%. (Reporting by Fergal Smith; editing by Jonathan Oatis)