The Globe and Mail reports in its Thursday edition that the U.S. Federal Reserve did not hike
interest rates on Wednesday.
The Globe's guest columnist Louis-Philippe Rochon writes that the talk now is all about
when and how high rates will go, not if.
This strongly contrasts with the
state of monetary policy in Canada,
where rates are not expected
to go up until 2018, especially
in light of Bank of Canada
Governor Stephen Poloz's acknowledgement
this week that
our economy is failing to get make gains.
Eventually, though, rates will increase
here, too. Canadians'
fondness for debt is compounding
the problem.
Unlike U.S. household debt levels,
Canadian household
debt has been increasing, which
poses unique challenges for the
conduct of monetary policy. Raise
rates too high or too quickly, and
risk plunging the economy into a
severe down spin.
At the moment, household debt
relative to disposable income
stands at a record 167.6 per cent.
At record-low interest rates, and
with the lack of any meaningful
regulations on household personal
borrowing, this trend will most
likely continue. Mr. Rochon says such high debt levels
pose risks for the Canadian economy
and for economic policy.
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