Bank of Canada's Carolyn Rogers says inflation won't come down overnight

Canadians might be disappointed if they were expecting a quick fix. Carolyn Rogers is a senior deputy governor at the Bank of Canada.

Rogers said in a speech that the central bank's rate decisions could take up to two years to have an effect on inflation.

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In her second public speech since joining the bank, Rogers said it would take some time to get inflation back to 2%. There could be problems along the way.

The policy works like a sequence of events. That sequence takes a while to complete. Changing the bank's policy rate affects different households and sectors of the economy in different ways.

As rising mortgage costs have taken demand out of housing markets, the housing sector has been a prime example.

Getting inflation all the way back to two per cent will take some time

Carolyn Rogers

One day after the Bank of Canada raised the policy rate by 75 basis points, the speech came. With a tight labour market and rampant inflation, Rogers pointed to the rising risks of this inflation becoming entrenched as the reason for the move.

In her economic progress report update, Rogers noted that while the consumer price index fell below eight per cent, most of the decline was due to falling gasoline prices and that core inflation continued to rise. The fight against inflation is more difficult due to uncertainties in the global commodity markets.

Rogers acknowledged that Canadians are having a hard time with rising borrowing costs and high inflation.

Rogers said that some Canadians are anxious to know if the rate hikes will bring down inflation. Many Canadians are already facing high inflation and higher rates are making it worse. Raising interest rates is the best way to bring inflation down.

Rogers speech was characterized by some economists as a more surgical approach to monetary policy than what the central bank has been doing recently. Central bankers are increasingly concerned that inflation expectations could become unmoored and cause high inflation to become self-fulfilling.

The speech made clear that the lags in monetary policy mean that central bankers are blind when it comes to how high rates need to rise. Monetary policymakers will be guided by the latter if they have to choose between a recession and controlling inflation.

Rogers said the Bank of Canada would keep a close eye on global developments that could impact supply chains.

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