October 20, 2010 / 5:28 PM / 7 years ago

Bank of Canada sees "subdued" household spending

* Says can handle a housing bubble within current mandate

* Has flexibility in terms of inflation target

OTTAWA, Oct 20 (Reuters) - If an asset price bubble arises in Canada’s housing market, there would be room to deal with it within the Bank of Canada’s current inflation-targeting mandate, the head of the central bank said on Wednesday.

Mark Carney has expressed concerns on several occasions in recent months about rising household debt levels, which have been fueled in part by low borrowing rates.

He said on Wednesday, however, that the bank expects a more “subdued profile for household spending” going forward, following a recent stretch of robust growth.

The slowing global economic recovery -- especially in the United States -- led the Bank of Canada to hold interest rates at 1 percent on Tuesday after raising them in its prior three consecutive meetings. [ID:nN19118876]

The higher rates helped temper the strength in Canada’s housing market, which some market observers said was beginning to get ahead of itself.

Carney said that while the bank’s clear mandate is to target inflation, it has the ability to deal with any bubbles that might arise.

“There is some flexibility in terms of achieving the inflation target horizon, I would say under the current mandate, that would take into account asset price bubbles if appropriate,” he told reporters in Ottawa.

“But we have set policy appropriately. I have referenced what our expectations are for household debt, and we’re comfortable with where we are.” (Reporting by John McCrank; editing by Rob Wilson)

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