The annual rate of inflation in Canada rose more than expected in April, pointing to strong economic recovery and paving the way for a long-anticipated interest hike by the Bank of Canada as early as June.

The economy has recouped about two-thirds of the jobs lost in the recession and a rate hike would seem like a sure thing.

Yet there is still uncertainty in financial markets as investors grapple with the volatile debt crisis in Europe, economists said.

Statistics Canada said seven of the eight components of its consumer price index increased in the 12 months to April with only the clothing and footwear sectors declining.

The cost of buying a car rose 5.3 per cent in April as well as higher prices for auto insurance, property taxes and meals at restaurants.

“At the end of the day the necessity is that people have to buy cars and buy houses,” says Scott Robertson, owner of Murray GM.

“It is still a heck of a lot cheaper than interest rates were back in the eighties.”

During the eighties interest rates rose as high as 19 per cent, but analysts are predicting much more modest rate increases at this time.

“I don’t think interest hikes will have that much effect on consumer spending,” says Patrick Lindsay, general manager of Community Futures.

“What will have a major impact on people’s buying things now is the HST.”

The HST will be implemented on July 1, combining the provincial sales tax with the general sales tax on many items in British Columbia.

“We are now starting to see the failure of the Euro, which means investors will be going back to the US dollar, lowering the Canadian dollar,” says Lindsay.

“There are many good things that are happening here in Merritt, but we still have higher than average unemployment.”

With banks raising and now lowering mortgage rates, it is still too early to say conclusively if the recession is over, but all indications point to the worst being behind us.