Canada's Central Bank Admits Interest Rate Can't Fix Housing Affordability
The Bank of Canada's key interest rate is not an effective tool for addressing housing unaffordability, according to Senior Deputy Governor Carolyn Rogers. She stated that lower rates fuel rising prices while higher borrowing costs deter prospective buyers.
Rogers acknowledged the limitations of monetary policy in addressing the complex issue of housing affordability. The Bank of Canada's interest rate is set for the entire economy, not just for the housing market.
The official explained that interest rates cannot directly address supply constraints, such as building homes or rezoning land. She defended the central bank's actions during the COVID-19 pandemic, saying that keeping low interest rates helped cushion the economy against uncertainty but was criticized for fueling surging home prices.