Speculation has been growing that the Bank of Canada (BoC) will have to up the size of its interest rates hikes in the months to come in order to control rapidly rising inflation -- and now, the central bank head himself has confirmed the possibility.

Speaking in Washington, D.C. Thursday, BoC Governor Tiff Macklem acknowledged that the bank’s monetary policy has been dragging behind economic conditions, saying, “We’re prepared to be as forceful as needed and I’m really going to let those words speak for themselves.”

As with most statements uttered by Macklem, those words have stoked new expectations that the BoC is set to make a 0.75% hike to its trend-setting Overnight Lending Rate in its next announcement on June 1 -- a monetary policy move not seen since the late 90s.

READ: “We See Prices Peaking This Spring: Interest Hikes a Game Changer, Says RBC

The BoC is facing increasing pressure to achieve its target rate (an interest rate that’s high enough to avoid juicing borrowing behaviour, without causing undue economic strain), which sits in the range of 2-3%. Doing so is paramount to fighting runaway inflation growth, which hit 6.7% in March -- a 31-year high. A 75-basis-point increase would bring the target rate to 1.75%; that's still below the neutral range, but would be the highest seen since 2017.

Such a large hike would follow the half-point increase the BoC delivered earlier this month, which signalled the central bank was poised to take a more aggressive approach to tightening monetary policy, and that consumer borrowing costs were set to rise exponentially.

The BoC is also feeling the heat from south of the border, as Jerome Powell, Chair of the U.S. Federal Reserve, has indicated at least two 0.5% increases could be in store for the American cost of borrowing.

A Growing Chorus 

A number of economists have called for a need for more aggressive monetary policy. Earlier this week, Derek Holt, head of Capital Economics at Scotiabank, wrote in a client note there was a “solid case” for the BoC to make a full 1% increase in June, given inflation’s scorching rise.

“Monetary policy tailored to current conditions should already be at neutral -- if not above -- given where inflation is and with a full employment recovery as the economy has moved into excess aggregate demand,” he wrote.

Most recently, National Bank of Canada’s Chief Economist and Strategist Stéfane Marion has said the Bank is behind the eight ball, telling BNN Bloomberg that “50 [basis points] is the new 25 when it comes to central bank moves at this time.”

“To allow your inflation rate to surpass the unemployment rate means that the Bank of Canada was a little bit too permissive, and as of last November, they were claiming that the unemployment rate was not a good measure of potentially inflationary pressure. The last few months have proven the Bank of Canada wrong, so now it's in catch up mode.”