2 May 2018

“Such debt numbers have a significant influence on the monetary policy,” – he noted.

As you know, Poloz has raised the rate three times since July, after the national economy started gaining momentum at the end of 2016.

However, last month, the Bank stopped at 1.25%, taking a cautious approach to the issue of its next increase. The next rate meeting is on May 30, but most economists predict a rate hike only in July.

Poloz says the debt amount is one of the main reasons why the BoC is so careful with its rate policy. In his opinion, it’s an important vulnerability for borrowers, which exposes the entire economy to possible shocks.

According to him, the debt is the result of several factors, such as strong demand for real estate and a long period of low mortgage rates, aimed at supporting the economy.

He also put some light on issues the bank is reviewing when determining the timing of its next rate hike.

In case the rates are raised too soon, it could lead to reduced economic growth, inflation leaving the target limits and the financial stability risks.

There are also some other issues considered by the Bank: economic influence of tighter mortgage rules, today’s uncertainty over U.S. trade policy, the North American Free Trade Agreement and several competitiveness challenges for Canadian exporters.