Bank of Canada gov­er­nor ex­pects more bank­rupt­cies

Penticton Herald - - CANADA -

OT­TAWA — Bank­rupt­cies are up in Canada, the head of the Bank of Canada said this week, and he ex­pects they’ll rise even more as the cen­tral bank con­tin­ues to hike in­ter­est rates.

Gov­er­nor Stephen Poloz said he hears just how dif­fi­cult higher bor­row­ing costs can be straight from the peo­ple feel­ing the pain.

“We’re acutely aware that our de­ci­sions af­fect ev­ery­body — they af­fect the fi­nan­cial well-be­ing of ev­ery­body and many Cana­di­ans are car­ry­ing a high debt­load,” Poloz told re­porters Wed­nes­day after hold­ing the bank’s key in­ter­est rate at 1.75 per cent. “I don’t have to work hard to re­mind my­self of that. I get daily cor­re­spon­dence from peo­ple ex­plain­ing to me what their sit­u­a­tion is.”

Ac­cord­ing to the bank, Poloz per­son­ally re­sponds to emails and let­ters ad­dressed to him from the pub­lic. Last year, for in­stance, about 200 peo­ple reached out to him di­rectly. The most com­mon themes of the mes­sages are the state of the Cana­dian econ­omy, in­fla­tion and in­ter­est rates, a bank spokes­woman said. If they aren’t abu­sive and they in­clude re­turn ad­dresses, he an­swers them.

Poloz’s decision to leave rates un­changed this week is likely just a pause on the bank’s rate-hik­ing path as the coun­try deals with what he de­scribed as a tem­po­rary eco­nomic set­back from a sharp de­cline in oil prices.

The cen­tral bank will con­tinue rais­ing rates once Canada gets past the soft patch and the econ­omy builds new mo­men­tum, he said. A stronger econ­omy has en­cour­aged Poloz to raise the rate tar­get five times since mid-2017 to keep in­fla­tion from even­tu­ally run­ning too hot.

But in re­cent months, the num­ber of Cana­di­ans who have run into fi­nan­cial trou­ble has edged up. In­sol­ven­cies have seen a slight in­crease after spend­ing nearly a decade at very low levels. Fol­low­ing a long pe­riod of cheap bor­row­ing, Cana­di­ans have amassed record piles of debt.

“On bank­ruptcy sta­tis­tics, I un­der­stand that they have picked up,” Poloz said when asked about the re­cent fig­ures. “My un­der­stand­ing of the data points is that they’re picked up from an ex­traor­di­nar­ily low level. So, there is, in any point in time, al­ways a cer­tain num­ber of un­for­tu­nate folks who may lose their job or what have you and go through this process.

“And it wouldn’t be sur­pris­ing to see things pick up a lit­tle bit when in­ter­est rates have risen.”

Poloz added the bank has de­lib­er­ately been very care­ful and very grad­ual in its hik­ing, while re­mind­ing peo­ple the low-rate era wouldn’t last.

Poloz

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