Growing debt could threaten stability as rates rise, says Bank of Canada's Rogers StephHughes95
Concerns over consumer debt are hardly new. Canadians were carrying significant debt even before the pandemic, the central bank’s second in command noted. Balance sheets even improved during the pandemic as Canadians curbed their spending and built a buffer of savings, which bank economists estimated reached $300 billion. Now, the tide is turning as rising cost pressures force Canadians to take on more debt. Total consumer debt jumped by 9.2 per cent year-over-year to $2.
Canadians are now feeling the pinch from inflation and higher rates. After hiking the policy rate by three percentage points this year to 3.25 per cent, the Bank of Canada has said it is ready to tighten even further to put a lid on decades-high inflation. Rogers pointed to the bond market drama playing out in the U.K. as an example of the kind of liquidity squeeze the Bank will be on alert for. Yields on government bonds there soared, sparking forced selling by over-leveraged pension plans, after U.K. Prime Minister Liz Truss attempted to freeze corporate taxes for next year.Article content
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Growing debt could threaten stability as rates rise, says Bank of Canada's RogersGrowing debt could threaten stability as rates rise, says Bank of Canada's Rogers StephHughes95
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