Canada’s Debt Binge Has Macquarie Sounding Alarm on Rate Hikes
- Rate-hike cycle already the most severe in 20 years, bank says
- 30% of nominal GDP growth has come from housing, autos
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The unprecedented rise in consumer debt means the Bank of Canada’s rate-hiking cycle is already the most severe in 20 years and further increases will have far graver consequences than conventional analysis shows, Macquarie Capital Markets Canada Ltd. said.
Assuming just one further rate rise, the impact would be 65 percent to 80 percent as severe as the 1987 to 1990 cycle, according to Macquarie, which took into account five-year bond yields, household debt and home buying. Canada’s housing market slumped in the early 1990s after that rate-hike cycle and a recession.