TORONTO (Reuters) - Interest rate hikes have become less imminent than the Bank of Canada once expected, although rates are still likely to rise, central bank Governor Mark Carney said in an interview published on Saturday.
“Over time, rates are likely to increase somewhat, but over time, so a less imminent timing relative to our expectation,” Carney said in an interview with the National Post newspaper.
Canada’s economy rebounded better than most from the global economic recession, and the Bank of Canada is the only central bank in the Group of Seven leading industrialized nations that is currently hinting at higher interest rates.
But Carney has also made clear that there will be no rate rise for a while, despite high domestic borrowing rates that he sees as a major risk to a still fragile economy.
“We’ve been very clear in terms of lines of defense in addressing financial vulnerabilities,” he said in the interview. “And the most prominent one, obviously, in Canada, is household debt.”
He said the bank was monitoring the impact of four successive government moves to tighten mortgage lending, which aimed to take the froth out of a hot housing market without causing a damaging crash in prices.
A Reuters poll published on Friday showed the majority of 20 forecasters believe the government has done enough to rein in runaway prices, preventing the type of crash that devastated the U.S. market.
The experts expect Canadian housing prices to fall 10 percent over the next several years, but they do not expect the recent property boom to end in a U.S.-style collapse.
Reporting by Janet Guttsman; Editing by Vicki Allen