OTTAWA, Canada: The Bank of Canada’s central bank has said that it will raise its target interest rate by a full percentage point to combat inflation, warning that further rate hikes are likely.

In the largest increase since 1998 and the highest level since 2008, Canada’s central bank raised the overnight rate to 2.5 percent.

Blaming Russia’s invasion of Ukraine, ongoing supply disruptions and excess national demand, the bank said inflation is higher and more persistent than predicted and will likely remain around 8 percent over several months.

Bank of Canada Governor Tiff Macklem said, “Inflation is too high. And more people are getting more worried that high inflation is here to stay. We cannot let that happen,” as quoted by the Associated Press.

“The Canadian economy is overheated. There are shortages of workers and of many goods and services. Demand needs to slow so supply can catch up and price pressures ease,” he added.

In the highest yearly increase in almost 40 years, Canada’s Consumer Price Index rose by 7.7 percent, and the bank stressed that more than 50 percent of price categories rose by more than 5 percent.

Most economists predict a rate hike of three-quarters of a percentage point.

In a note, Karyne Charbonneau, senior economist at CIBC Capital Markets, said, “After being overtaken by the Fed in June, the Bank of Canada reclaimed its top-gun status, with the highest policy rate among G7 countries and the biggest step in this tightening cycle, as it seeks to calm inflation fears.”

“By front-loading increases now, we are trying to avoid even higher rates down the road,” Macklem added.