OTTAWA, Oct 7 (Reuters)

The factors influencing Canada’s red-hot inflation are proving more persistent than expected, but there are “good reasons to believe” they remain temporary, Bank of Canada Governor Tiff Macklem said on Thursday.

Macklem, answering questions after a speech to a foreign policy think-tank, said Canada’s central bank continues to expect inflation to remain above its 1-3% target range in 2021, primarily due to base-year effects and supply chain disruptions.

“There’s a bit more persistence than we previously thought. But when you look at it, I think there are good reasons to believe that they are temporary,” he said, when speaking about the factors driving inflation.

Canada’s annual inflation rate accelerated to 4.1% in August, an 18-year-high.

Macklem also said the Bank of Canada is watching wage growth carefully, but that it is not seeing evidence of wages becoming an independent source of inflation.

He later said that it is taking a bit longer than expected to work through “frictions” in the labor market, as it takes time for companies to find the right workers, and workers to find the right jobs.

“We’ve never reopened an economy before. And I think what we’re seeing is reopening an economy is a lot more complicated than closing one,” he said.

Macklem, in his speech, made the case for greater cooperation in the international monetary and financial system to handle challenges ahead, like the exit from exceptional monetary policy, climate change and digital currencies. (Reporting by Julie Gordon in Ottawa Additional reporting by Steve Scherer Editing by Frances Kerry and Paul Simao)