Bank of Canada Governor Mark Carney
is looking for more substantial economic growth before hiking his the Overnight rate; but he is also factoring in the housing market and personal debt before making any decision.
In a flurry of online, television and newspaper interviews recently, Carney initially hinted that rates could rise if personal debt isn’t adjusted in a more timely way; interest rates “could be higher sooner if this isn’t addressed.”
However, Carney later stated that any rate increase would be predicated on several factors, including a minimum rate of economic growth and a stronger housing market.
“First, the economy needs to grow above its so-called potential rate of growth; so it needs to grow more than 2 percentage points,” said Carney. “Secondly, you need to see a continuation of what is becoming a positive evolution of household debt and aspects of the housing market. They’re both moving; moving in the right direction towards more sustainable levels. So we need to see those aspects and also inflation picking up a little bit before we would move.”
Carney has made household debt reduction his top priority before moving on to take over as head of the Bank of England, and has said that the combination of his warnings of raising interest rates and the federal government’s tightening of mortgage access has successfully cooled the housing market and household debt.
Carney was named the next governor of the Bank of England in November, after maintaining the Bank of Canada’s trend-setting rate of 1 per cent since September of 2010 in the hopes of spurring domestic business activity.
The bank’s latest quarterly forecast on Wednesday lowed its prediction for 2013, expecting the economy to grow by only 1.5 per cent – below Carney’s benchmark of 2 per cent growth for any potential raising of the rate.