Bank of Canada keeping close eye on household debt as pandemic drags on, deputy says

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OTTAWA — One of Canada’s top central bankers says the Bank of Canada is keeping a close eye on household debt that were already elevated before COVID-19.

The Bank of Canada had warned that a recession could easily strain the financial system and the debt load being carried by households.

Deputy governor Toni Gravelle says that fear hasn’t played out during the pandemic, despite it being the worst downturn since the Great Depression.

He says the key has been the level of aid provided by governments, that helped replace lost earnings, and low interest rates that were driven down by the Bank of Canada putting its key policy rate at 0.25 per cent.

Still, Gravelle warns the country needs to watch out for the possibility that the tough times many households and businesses face could ripple throughout the financial system.

If losses make it harder for banks to make loans, Gravelle says the economic recovery will be hampered and amplify an already challenging situation.

This report by The Canadian Press was first published Nov. 23, 2020.

The Canadian Press

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