OTTAWA—The rapid acceleration in prices has increased the likelihood the Bank of Canada may need to double its policy interest rate, from its current 1.5% level to 3% or higher, to drive inflation toward its 2% target, a senior central bank official said Thursday.

“The bottom line is that the risk is now greater that inflation expectations could de-anchor and high inflation could become entrenched,” Bank of Canada deputy governor Paul Beaudry said in a speech to a business audience in Gatineau, Quebec. “This raises the likelihood…