Bank of Canada emphasizes key vulnerability of rising household indebtedness

OTTAWA – The Bank of Canada is using a speech today to emphasize its concerns over rising household debt and its potential impact on the country’s financial system.

In prepared remarks of his address, deputy governor Lawrence Schembri says growing household indebtedness largely caused by low interest rates remains a key weak spot for Canada’s financial stability.

He says higher levels of consumer and mortgage debt have left the economy and Canadians more vulnerable to negative shocks — such as a severe recession that could drive up unemployment.

Schembri’s remarks come as the economy struggles to recover from the steep slide in oil prices.

He also spoke as the federal government appears poised to run budgetary deficits in order to invest billions of dollars in areas such as infrastructure as a way to boost Canada’s weak growth.

Schembri also reaffirmed the central bank’s view that measures such as fiscal stimulus from Ottawa are better suited at this point to help improve financial stability because the benchmark interest rate is already very low.