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(Bloomberg) — Bank of Canada Governor Tiff Macklem said he remains firmly on an interest rate hiking path amid worries about elevated domestic price pressures and inflation expectations becoming entrenched.

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Macklem, in a speech Thursday, painted a picture of an economy that is still “clearly” in excess demand, with businesses facing an extremely tight labor market, with wage gains broadening and underlying inflation pressures showing no signs of easing.

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Canada two-year benchmark yields hit the highest level since 2007 on his comments, jumping more than 5 basis points to as high as 3.976%. Traders increased their bets on a 50-basis-point rate increase at the next policy decision on Sept. 26. 

He said that while a recent slowdown in the headline annual reading is “welcome news”, inflation will “not fade away by itself.”

“Simply put, there is more to be done,” Macklem said, according to prepared remarks to the Halifax Chamber of Commerce. “The clear implication is that further interest rate increases are warranted.”

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In an apparent signal the central bank doesn’t see itself near the end of its hiking cycle, Macklem said: “We will need additional information before we consider moving to a more finely balanced decision-by-decision approach.”

The hawkish comments will likely cement expectations that the Bank Canada will deliver another outsized hike to its 3.25% policy rate at the Oct. 26 decision.

Macklem has already increased borrowing costs by 3 percentage points since March. Before the speech, markets were pricing in a 50 basis-point increase this month, and another 25-basis-point hike in December.

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(Updates with two-year market reaction in third paragraph)