OTTAWA — Bank of Canada governor Stephen Poloz says Canadians have amassed a $2-trillion mountain of household debt that is now casting a big shadow over the timing of his next interest rate hike.
In prepared remarks of a speech Tuesday in Yellowknife, Poloz said the pile has been growing for three decades in both absolute terms and when compared to the size of the economy — and about $1.5 trillion of it currently consists of mortgage debt.
The central bank has concerns about the ability of households to keep paying down their high levels of debt when interest rates continue their rise, as is widely expected over the coming months.
Poloz says the volume of what Canadians owe is an important vulnerability for individuals and the entire economy — and it’s one of the key reasons why the bank has been taking a cautious approach to raising its trend-setting rate.
However, he says there’s good reason to think Canada can manage the risks from debt, which he says is a natural consequence of several factors, including the combination of a strong demand for housing and the prolonged period of low interest rates maintained in recent years to stimulate the economy.
The central bank stuck with its benchmark rate of 1.25 per cent last month as it continued its careful process of determining the best juncture for its next hike.
Poloz has introduced three rate hikes since last July following an impressive economic run for Canada that began in late 2016.
The Canadian Press
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