UPDATE 1-Canada's Oliver says core inflation nowhere near deflationary

Fri Feb 20, 2015 10:35am EST
 
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TORONTO Feb 20 (Reuters) - Canadian Finance Minister Joe Oliver, asked whether he was worried about a forecast that overall inflation might turn negative, on Friday said core inflation in Canada was nowhere near deflationary levels.

Bank of Canada deputy governor Agathe Cote had said on Thursday that inflation could dip into negative territory on the back of slumping oil prices. She stressed there was no reason to fear deflation in Canada because inflation expectations were anchored.

"What I understand them (the Bank) as saying is the very significant decline in oil prices will have an impact on inflation on a monthly basis. But core inflation is not anywhere near deflationary levels," Oliver told reporters.

Lower gasoline costs pulled down the Canadian annual inflation rate in December to a nine-month low of 1.5 percent.

But the measure of core inflation - which strips out the prices of some volatile items and is closely watched by the Bank of Canada - increased to 2.2 percent from 2.1 percent.

The lower oil prices have forced Oliver to push back the date of the budget until at least April. He also declined to give more precise details on Friday of when it might be unveiled but said he would give two to three weeks' advance notice. (Reporting by Alastair Sharp, writing by David Ljunggren; Editing by Chizu Nomiyama and Nick Zieminski)