8 Second, it is part of the general strengthening of the U. S. dollar as that economy strengthens and the Federal Reserve moves closer to normalizing monetary policy. By that logic, we exclude the direct impact of the pass-through effect of the exchange rate movement in assessing underlying inflation. Therefore, we judge that underlying inflation is around 1.5 to 1.7 per cent.
Of course, the effect of the weaker Canadian dollar in stimulating the Canadian economy is an essential element of our projection that underlying inflation will return sustainably to target, with the economy back to its potential, over the next couple of years. 6  M. Khan, L. Morel and P. Sabourin, “A Comprehensive Evaluation of Measures of Core Inflation for Canada,” Discussion Paper No.