High inflation 'is keeping us up at night,' says Bank of Canada senior deputy governor

The Bank of Canada's senior deputy governor said inflation is keeping the central bankers "up at night" and did not rule out a three quarter point hike.

According to Carolyn Rogers, senior deputy governor, the 7.7 per cent increase in the inflation rate was not an entirely unexpected number.

Canadian consumer prices increased in May at rates not seen since January 1983, beating economists' forecasts and turning up the pressure on the central bank to follow the U.S. Federal Reserve with a hike.

The Bank of Canada had expected the inflation rate to average 5.8 per cent this quarter, but it was higher than that.

Rogers said that inflation is hurting Canadians. It keeps us up at night and we will not rest easy until we get it back down to target.

Rogers did not rule out the possibility of a 75-basis-point hike in July.

She said that the July decision would be taken when they get to July. Rates need to go up because the economy is in excess demand.

The most important task right now is to get inflation back to target, which is between 2 and 3 percent, with the least amount of consequences possible.

There is a path that we can take. She said that they think we can take some of the excess demand out of the economy.

The Bank hiked its benchmark rate from 0.25 per cent to 1.5 per cent early this year.

We know the parts of the economy that are most sensitive to interest rate changes are where Canadians borrow and that is how monetary policy works. You will see a quick reaction if you borrow.

She said that the Bank believes that global inflation will start to ease as the effects of the swine flu diminish.

There are additional reports by the news agency.

The email address is shughes@postmedia.

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