WASHINGTON, April 17 (Reuters) - The Bank of Canada will ignore that part of the surge in March core inflation which is due to the fall in the Canadian dollar, Governor Stephen Poloz said on Friday, adding that the growing output gap was exerting downward pressure on inflation.
Canada’s core inflation rose to 2.4 percent in March from 2.1 percent in February, putting it well above the central bank’s 2 percent target. Poloz, however, said the jump was primarily due to higher prices for cars, which are sensitive to exchange rates.
The Bank of Canada does not see price rises from the exchange rate pass-through as fundamental inflation, he told journalists on the sidelines of the spring meetings of the International Monetary Fund and World Bank in Washington.
“As far as I know, the output gap’s actually getting bigger as we sit here, not smaller, so the fundamental forces on inflation are downward, not upward,” Poloz said. (Reporting by Randall Palmer; Editing by Paul Simao)