OTTAWA (Reuters), – Tiff Macklem the Governor of Bank of Canada, said that inflation is still uncertain due to unique characteristics of the COVID-19 panademic which has driven up prices.

Macklem reiterated to the Senate banking panel that the interest rates must rise this year in order to combat inflation. The current rate is 4.8%. This is more than twice what the central bank wants to achieve at 2%.

His words were: “There’s some uncertainty as to how quickly inflation will drop because there hasn’t been an epidemic like this.”

He said that rate increases were necessary as labor markets are tightening, and there is evidence of increasing capacity pressures.

The bank said last week the economy no longer needed help https://www.reuters.com/business/finance/hike-or-not-its-toss-up-ahead-bank-canada-rate-decision-2022-01-26/#:~:text=OTTAWA%2C%20Jan%2026%20(Reuters),of%20the%20COVID-19%20pandemic to deal with the effects of the COVID-19 pandemic, but kept rates steady at a record low 0.25%.

Macklem stated that “we are confident that inflation is going to come down.” He said that inflation will reach a peak of around 5% during the first half this year, before decreasing.