Julie Gordon and David Ljunggren

OTTAWA, Reuters – The Bank of Canada will act quickly and possibly “forcefully” to combat uncomfortably high levels of inflation, a top official stated on Wednesday. This sets the scene for an aggressive campaign of raising interest rates.

Timothy Lane, the Deputy Governor of the Bank, stated that there was an increased risk that inflation would continue to grow than anticipated and that the bank was increasing its focus on countering these upside risks.

“We will be nimble — and if necessary, forceful — in using our monetary policy tools to address whatever situation arises, as we have done throughout these turbulent times,” Lane said.

Official data on Wednesday showed that Canada’s January annual inflation rate was at its highest level in 30 years, with 5.1%. This was the 10th consecutive monthly increase in the inflation rate that has been higher than the Bank of Canada’s 1-3% range.

Lane stated that “currently, with inflation well beyond our target,” Lane added.

Lane said that because of the stronger demand and more limited supply, Lane predicted that an economic rebound would be faster than previously expected.

Lane stated that the central bank still expects there to be less supply disruption and for inflation to fall quickly during the second half 2022. However, it was “alert” to the possibility of inflation becoming more persistent.

According to the central bank, January’s announcement stated that Canada had absorbed its economic weakness and that interest rates should rise from their historic low of 0.25%. Canadians can expect several increases, according to Governor Tiff Macklem.

The money markets expect a March 2nd hike to the rate of 0.5%, and a chance for a 50 basis-point larger increase. After Lane’s remarks, the Canadian dollar rose 0.3% to 1.2680 against the greenback. That is 78.86 U.S. Cents.