Bank of Canada Governor Tiff Macklem said the neutral rate of interest is likely rising, and he wasn’t fully confident in the central bank’s decision to leave their estimate of the measure unchanged earlier this year.

The neutral rate — a theoretical level of borrowing costs that neither stimulates nor restricts the economy — may be gradually drifting higher, Macklem told Canada’s Senate economy committee in Ottawa on Wednesday.

“I think there are some reasons to believe it’s more likely that the neutral rate is higher than lower,” Macklem said, adding that the future impacts of higher fiscal deficits, aging societies and larger investments in renewable energy need to be considered, not just historical evidence.

Macklem also admitted he “wasn’t totally comfortable” after policymakers left unchanged their estimate for the range of the nominal neutral rate in Canada — between 2% and 3% — in April after the central bank’s annual review.

The comments suggest the Bank of Canada may view interest rates, which are currently at 5%, the highest level in 22 years, as less restrictive, or having less bite, than previously believed.

If the neutral rate is drifting up in the background “we’ll think monetary policy is tighter than it really is,” Macklem said, and the resulting higher-than-expected inflation would mean interest rates would have to move a “a little bit higher than otherwise to get inflation back to target.”

In June, then-Deputy Governor Paul Beaudry delivered a speech on the evolution of the neutral rate of interest rate, offering a similar conclusion.