A senior official at the Bank of Canada confirmed that the need to improve productivity has reached an emergency level as the economy faces a future where inflation may pose a greater threat than it has in recent decades.

Caroline Rogers, Deputy Governor of the Bank of Canada, said in a speech delivered on Tuesday, "Do you know those signs that say: 'In case of emergency, break glass?' Well, it's time to break the glass."

Rogers said that Canadian labor productivity made small gains at the end of last year, but that came after six consecutive quarters in which productivity declined.

She pointed out that the United States saw productivity gains driven by the pandemic as companies found their footing, but Canada did not see the same thing.

Rogers added, "In fact, the level of productivity in the Canadian business sector has not changed from what it was seven years ago."

The need to improve productivity comes as Rogers said many forces that helped create a benign inflation environment in the past will dissipate or even reverse.

We know that demographic changes and the economic effects of climate change will tend to exert upward pressure on prices. She added that ongoing global trade tensions also increase the risk of inflation in the future.

The Bank of Canada's next decision on the interest rate and monetary policy report is scheduled for April 10.

Inflation has slowed in recent months, with an annual rate of 2.8 percent in February. Economists will watch what the central bank, which targets a 2 percent annual inflation rate, says about cuts in the main policy rate target.

Rogers said on Tuesday that productivity is a way to shield the economy against inflation; productivity lag in Canada has been a chronic problem.

Rogers confirmed that when comparing Canada's recent productivity record with that of other countries, what stands out is how far behind the country is in investing in machinery, equipment, and intellectual property.

She also said that Canada needs to focus on ensuring that the training and education provided teach the skills needed, while a more competitive business environment will help drive more innovation and efficiency.