The bully pulpit can be a powerful tool for central banks, but it’s hard to be heard over the buzz of a housing frenzy.
“We were giving speeches quite regularly and saying to people, this is a looming problem,” Bank of Canada Governor Stephen Poloz said in testimony before the Standing Senate Committee on Banking, Trade and Commerce on May 1 in response to a question about the efficacy of tighter mortgage rules.
“I shouldn’t have to convince you to put on a life jacket if you’re going out in a canoe. That’s just normal practice,” Poloz continued. “Same thing for a mortgage. You should just sort of stress test yourself, like how would that look if rates were 100 or 200 basis points higher when it’s time to renew. And [the speeches] didn’t really have any effect on any of the numbers.”
It was an important lesson.
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