Bank of Canada Governor Raises Concerns About Consumer Debt

Bank of Canada Governor Stephen Poloz said over the weekend that he is increasingly concerned about the level of consumer debt, and that the central bank is being tentative regarding future interest rate increases as a result.

Speaking on the CBC Radio program The House, Governor Poloz said that the central bank is taking a cautious approach to interest rates and that it's being tentative largely because it needs a better understanding of the current debt levels of Canadians and how rising interest rates will impact them.

“It's the one thing I would say we're the most cautious about,” Governor Poloz said concerning consumer debt. “Because of all that debt, we aren't as sure as we normally would be, what would be the response of the economy to a higher rate of interest.”

The Bank of Canada raised its benchmark rate twice this year — once in July and again in September — after staying on the sidelines for the previous two years. Last week, the central bank chose to leave its benchmark interest rate steady at one per cent, prompting questions as to when the next increase might come.

“As the economy continues to evolve as it has been, it will be the case that it will need less monetary stimulus in the future,” Governor Poloz said. “There are a lot of things that have to come together before we feel confident that we're all the way there.”

The Bank of Canada is next scheduled to make a decision on interest rates on December 6th.