OTTAWA, May 9 - The Canadian financial system remains resilient but the continuing adjustment to higher rates and possible shocks present key risks to stability, Bank of Canada Governor Tiff Macklem said on Thursday.
Over the last year, the share of borrowers without a mortgage who carry a credit card balance of at least 80% - people the bank says are significantly likely to miss a future debt payment - has edged up and is now at 23%. Senior Deputy Governor Carolyn Rogers said evidence suggested households had the flexibility to continue servicing debts at higher rates, in part because they had set aside money and were also earning more.Before the report was released, money markets saw a roughly 60% chance of a cut in June, while a reduction in July is fully priced in.
"Stretched asset valuations may not properly reflect risks to the economic outlook and therefore increase the likelihood of a disorderly price correction," it said. "Not all asset managers have fully reflected these reduced valuations on their balance sheets, meaning that further adjustments may be necessary in the future," the report said.TFSA: 4 Canadian Stocks to Buy and Hold Forever
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