* Deputy Governor Cote says rates "very stimulative"
* Policy remains stimulative to counter external headwinds
OTTAWA Nov 14 Monetary policy remains very
stimulative in Canada, a senior central bank official said on
Wednesday, while also pointing out that excessive household
borrowing is the biggest domestic risk to the economy.
The comments in a speech by Bank of Canada Deputy Governor
Agathe Cote highlight the dilemma facing the bank as it weighs
the need to lift interest rates to curb soaring personal debt
against the need to keep the easy money flowing at a time of
"Monetary policy remains very stimulative to counter
external headwinds," Cote said, according to a slide
presentation published on the central bank's Web site just
before she spoke to a business audience in Rimouski, Quebec.
Europe is stagnating and the U.S. recovery is the slowest
since the Great Depression she said, repeating the bank's
justification for why it has kept its benchmark interest rate at
an extraordinarily low 1 percent for over two years.
Despite that outlook, the bank has been signaling since
April that it wants to raise interest rates, the only one in the
G7 major economies to do so. Last month Bank of Canada Governor
Mark Carney said the need to lift rates had become less imminent
while still saying the next move would be up, not down.
Carney has expressed alarm over the sharp rise in the
debt-to-income ratio for households to a record 163 percent in
the second quarter, higher than in the United States or the
United Kingdom, and near levels seen in the United States just
before the housing crash.
The debt problem, combined with a hot housing market,
prompted the government to tighten mortgage rules in July for
the fourth time in as many years. There have been some signs
that Canadians are not accumulating debt as quickly and that the
housing market is cooling.
Carney said last month he could use monetary policy to deal
with the debt problem but only as a last resort. He said there
were "mixed signals" on the housing and debt issue and that more
time would tell whether enough had been done.