A senior Bank of Canada official warns the recent surge in newcomers has propped up rent and home prices, adding pressure to inflation.

In a speech in Windsor, Ont., deputy governor Toni Gravelle says that while the rise in immigration is helping grow the economy and the country’s workforce, it’s also fuelling inflation through housing demand.

Gravelle told the Windsor-Essex Regional Chamber of Commerce that rent price inflation continues to surge in Canada even as it declines in the U.S., partly because home construction south of the border has historically adapted more quickly to shifts in population.

The deputy governor is warning all levels of government to need to work together to reduce barriers to building more homes, or else rent and home prices could continue to climb.

Canada has experienced strong population growth in the last couple of years as the federal government pursues more ambitious immigration targets and allows more non-permanent residents into the country.

The Bank of Canada maintained its key interest rate target at five per cent on Wednesday, but cautioned it was prepared to raise rates if needed in its fight against inflation.

This article was first reported by The Canadian Press