OTTAWA - Bob Rae is predicting a bright future for liberalism in Canada as he takes on the daunting task of rebuilding the shattered federal Liberal party.

The high-profile Toronto MP was chosen interim leader Wednesday by a much-diminished Liberal caucus. His appointment was quickly approved by the party's national board of directors and is likely to last for up to 22 months before a permanent new leader is elected.

Rae acknowledged the party is in dire straits following its historic defeat in the May 2 election, which reduced the Liberals to a third-party rump with only 34 MPs. Michael Ignatieff resigned as leader after losing his own seat.

"The people of Canada gave the Liberal party a very clear and tough message in the last election," said Rae, a former NDP premier of Ontario. "It's a message that we have received and understood.

"We know that we have a lot of rebuilding to do. We know that we have a lot of work to do."

Still, Rae rejected suggestions the self-described "natural governing party" is in its death throes or that the Harper government's determination to eliminate the $2-per-vote subsidy for political parties will hasten its demise.

"I can assure you that the Liberal party has a future that is every bit as promising and great as our past achievements have been. I have no hesitation in saying that the Liberal party is here to stay. We're here to fight for the things that Canadians believe in."

Rae said the party has to become more of a "movement," taking on causes and issues that matter to liberal-minded Canadians and reflecting their values. Among other things, he said that includes "a profound belief" in the Charter of Rights, respect for diversity, a dislike of authoritarianism, narrow-mindedness and "the bumper sticker approach to government," and a determination to "move beyond ideology."

"I think these are ideas that are very widely felt throughout the country and there are a lot of liberals out there who may not have a formal Liberal party membership but who feel that way. And I think those are the people to whom we have to appeal."

He said his top personal priorities are national unity, preserving Canada's universal health insurance system and tackling poverty in aboriginal communities.

As a first step towards restoring Liberal fortunes, Rae said the party must re-engage with rank-and-file members to become as open, transparent and accountable as possible.

Rae was chosen as interim leader by his 33 fellow MPs and 45 Liberal senators over Marc Garneau, a Montreal MP and former astronaut.

He had to give up his long-term leadership ambitions to take the post and promise not to engage in any discussions about a possible merger with the NDP -- conditions demanded by the party's national board.

While party brass could conceivably change the rules in future to allow him to run for the permanent leadership, the 62-year-old Rae said he's made a pact with his wife to serve only as interim leader.

"I also have no qualms about saying this is a limited term that I've accepted and I look forward to working within that term."

The precise length of Rae's term is uncertain.

Under the party's constitution a vote to choose a permanent successor to Ignatieff should take place by late October. However, the board is staging a "virtual" convention next month to ask Liberals to amend the constitution in order to postpone a leadership vote until sometime between Nov. 1, 2012 and Feb. 28, 2013.

Delegates to the online convention may choose to shorten or lengthen that time frame.