Bank of Canada official warns on debt level: report

Mon Feb 14, 2011 8:00am EST
 
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REGINA, Saskatchewan (Reuters) - The Bank of Canada remains concerned Canadians have too much personal debt and will get hurt as interest rates increase, a senior official said in an interview published on Monday.

Deputy Governor John Murray told the Leader-Post newspaper in Regina, Saskatchewan that the central bank worries people are becoming too indebted without thinking about the consequences of higher interest rates in the future.

"We know that interest rates, even though we've increased them from a quarter of a percent to 1 percent, remain exceptionally stimulative. We've also noted that any further reduction in stimulus would have to be very carefully considered," Murray told the newspaper.

"That said, we've also been at pains to remind Canadians that at some point (interest rates) are going to rise, that we see the economy (fully recovered) toward the end of 2012, so that the need for these sorts of stimulative polices is going to diminish."

Murray's comments echoed warnings given recently by Bank of Canada Governor Mark Carney and senior government finance officials.

Canadian household debt has risen to a record 148 percent of disposable income as people borrowed to take advantage of interest rates that have been kept down to stimulate the economy.

(Reporting Bruce Johnstone, Writing Allan Dowd, Editing by Jeffrey Hodgson)