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Rising rates could sink many Canadians
Published Friday, December 11, 2009 5:21PM MST
The Bank of Canada is keeping its benchmark interest rate at a record low but is warning Canadians that what goes down will eventually go up.
Homeowners have used rock-bottom rates to take on larger mortgages but a report from the central bank warns that rising debt levels will make households more vulnerable when interest rates eventually rise.
Frank Atkins, Senior Economist at the University of Calgary is questioning the validity of the banks warning and believes the Bank of Canada is losing credibility with this latest warning.
Atkins argues that the banks messages are inconsistent because they flip-flop on the advice they are giving to Canadians.
Atkins says that instead of being clear, the Bank of Canada is confusing people, at a time when the central bank needs to be solid in order to steer the country out of the recession.
"How in the world can they justify saying we lowered interest rates and encouraged you to borrow so you can spend to get us out of the recession and now they're saying don't borrow too much now and yet they are keeping interest rates very, very low in the hope it will continue to stimulate the economy," said Atkins.
The Bank of Canada has committed to keeping interest rates low until June 2010.