Bank of Canada Governor Mark Carney acknowledged Wednesday that inflation is running hotter than he had predicted, and emphasized the central bank's commitment to containing price increases, a combination of fact and nuance that increases the odds of an interest rate increase within the next few months.

The measure of inflation the central bank uses as a guide to where overall prices are headed touched 2.1 per cent in February, a pace the Bank Of Canada was not expecting until at least the second half of 2011.

“Core inflation has been slightly firmer than projected,” Mr. Carney said in the text of his speech to the Ottawa Economics Association.

Some economists have dismissed the stronger core rate as the result of temporary factors, such as a surge in hotel costs related to the Vancouver Olympics. Mr. Carney agreed that some of the increase is the result of “transitory factors,” but also said that a “higher level of economic activity” is also playing a role, suggesting policy makers are taking the jump in the core rate seriously.

Mr. Carney's musings about inflation are important because he and his senior advisers on the Governing Council are grappling with when to raise the central bank's benchmark overnight lending target from it current record low of 0.25 per cent.

Bank of Canada Governor Mark Carney acknowledged Wednesday that inflation is running hotter than he had predicted, and emphasized the central bank's commitment to containing price increases, a combination of fact and nuance that increases the odds of an interest rate increase within the next few months.

The measure of inflation the central bank uses as a guide to where overall prices are headed touched 2.1 per cent in February, a pace the Bank of Canada was not expecting until at least the second half of 2011.

“Core inflation has been slightly firmer than projected,” Mr. Carney said in the text of his speech to the Ottawa Economics Association.

Some economists have dismissed the stronger core rate as the result of temporary factors, such as a surge in hotel costs related to the Vancouver Olympics. Mr. Carney agreed that some of the increase is the result of “transitory factors,” but also said that a “higher level of economic activity” is also playing a role, suggesting policy makers are taking the jump in the core rate seriously.

Mr. Carney's musings about inflation are important because he and his senior advisers on the Governing Council are grappling with when to raise the central bank's benchmark overnight lending target from it current record low of 0.25 per cent.

The Bank of Canada will update its outlook for inflation in its next quarterly economic report, scheduled for release on April 22, Mr. Carney said. The central bank's next interest rate decisions are scheduled for April 20, June 1 and July 20.