Inflation, which peaked at 8.1% last year, accelerated for the first time in 10 months in April to 4.4%, more than double the Bank of Canada's 2% target.
The recent recovery in Canada's housing market is also putting pressure on prices, analysts say.
"The Bank of Canada's penchant for surprising traders means that nothing can be ruled out," said Royce Mendes, head of macro strategy at Desjardins Group.
Mendes said there could be more than one rate hike in the cards, and Canadians should "brace themselves for a further tightening in financial conditions this summer".
"The latest round of data adds weight to our view that the Bank will need to conduct an insurance rate hike at either of its next two meetings," said Jay Zhao-Murray, FX analyst at Monex Canada.
Persons:
Stephen Brown, Royce Mendes, Mendes, Macklem, Jay Zhao, Murray, Steve Scherer, Fergal Smith, Denny Thomas, Daniel Wallis
Organizations:
OTTAWA, Bank of Canada, BoC, Bank of Canada's, North, Capital Economics, Reuters, Federal Reserve, Desjardins Group, Monex Canada, Thomson
Locations:
North America, United States, States