Bank of Canada Governor Stephen Poloz says it’s a ‘bad idea‘ to raise interest rates to combat imbalances in housing and consumer debt as that would only hurt manufacturers and the general economy.
“Housing activity is showing renewed momentum and consumer debt levels are high, so household imbalances appear to be edging higher,” he said. “But it is our judgment that our policy of aiming to close the output gap and ensuring inflation remains on target will be consistent with an eventual easing in those household imbalances.”
Changes in Canada’s population justify growth in the housing market, and Toronto, Vancouver and Calgary are the only three cities showing signs of overbuilding, Poloz said at a press conference.
Canada’s dollar extended declines after the speech and as crude oil, one of the nation’s main exports, fell below $80 a barrel. The currency fell 0.9 percent to C$1.1357 against the U.S. dollar at 3:15 p.m. in Toronto.
It may be just a crazy idea, but if the government actually wanted to do something about house prices and consumer debt, wouldn’t eliminating mortgage insurance do that without any change in rates?