High household debt, possible housing market shocks are main risks to the economy, Bank of Canada says

The Bank of Canada said high household debt and imbalances in the housing market remain key vulnerabilities in the Canadian economy.

In its annual financial system review released Thursday, the central bank identified the main factors that could have negative consequences for the economy, while painting an overall picture of a stable financial system.

Bank of Canada governor Stephen Poloz said that progress has been made to address both issues.

“New measures have curbed borrowing, reduced speculative behaviour in housing markets and made the financial system more resilient,” he said in the report.

“While the fundamentals in the housing sector remain solid overall, and the sector should return to growth later this year, we continue to monitor these vulnerabilities closely.”

The Bank of Canada’s latest financial system review report is released in what is expected to be the first to explore the threat climate change poses to the financial system. Central bank governor Stephen Poloz and senior deputy governor Carolyn A. Wilkins discuss the report 0:00

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