Bank of Canada says high rates starting to work, worries over housing and debt

OTTAWA, Nov 22 (Reuters) – Higher interest rates are starting to slow the Canadian economy, the Bank of Canada said on Tuesday, putting pressure on households with elevated debt and people who recently bought a home with a variable-rate mortgage.

“It will take time to get back to solid growth with low inflation but we will get there,” Senior Deputy Governor Carolyn Rogers said in a speech at the University of Ottawa.

The Bank of Canada raised rates by 50 basis points last month to fight high inflation, lifting the policy rate to 3.75%, the highest since the 4% seen in January 2008. It also forecast the economy would stall through the middle of next year.

Rogers said the bank was monitoring how a combination of high home prices and high household debt, both longstanding economic vulnerabilities, could affect the stability of the financial system.

“The risk of a trigger that may affect financial stability has increased” as rates have gone up, she said. But there were good reasons to believe the system as a whole would be able to weather this period of stress, she added.

(Reporting by Steve Scherer, editing by David Ljunggren)

((Reuters Ottawa bureau, +1 647 480 7921; [email protected]))

Our Standards: The Thomson Reuters Trust Principles.

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