Bank of Canada governor warns of severe impact of house price reduction

 “Bank of Canada governor Stephen Poloz says the Canadian housing sector is vulnerable because of high housing prices and high levels of household debt, but says he continues to believe it is on course for a soft landing,” a CBC news online article wrote today. The article continued, “Speaking in Ottawa Thursday, Poloz said Canada’s financial system is vulnerable to a sharp correction in housing prices. ‘The most important domestic risk is a sharp reduction in house prices,’ he said at a news conference following the release of the central bank’s semi-annual review of the financial system. ‘If it were to happen, its impact on the economy and financial system would be severe,’ Poloz said. His statement comes a day after the Organization for Economic Co-operation and Development told Canada it was concerned that rising home prices were widening inequality and the International Monetary Fund warned that high house prices might be a threat to global growth. Poloz said the probability of a sharp correction is small and, if it comes, it will be caused by external factors, such as a sudden failure of the economic recovery that seems to be underway in the world economy.” Read the full article here.

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