The Bank of Canada is being urged by a Bay Street money manager to "put their foot down" in a bid to stamp out Canadians' insatiable appetite for debt.
"When it comes to consumer debt, you know what? We tell people to pay down their debt, we tell them to stop borrowing; but they keep doing it," said Gareth Watson, director of Richardson GMP's investment management group, in an interview with BNN Wednesday morning prior to the central bank's rate decision.
"And they're going to keep doing it, 'cause if you keep offering them free money - or I should say cheaper money - they're going to take it."
Household debt levels have marched steadily higher in recent years as historically low interest rates proved irresistible for Canadians. Statistics Canada's closely-watched credit market debt to disposable income ratio reached a record 171.11 per cent in the third quarter of 2017, meaning Canadians owed $1.71 for every dollar of after-tax income.
Bank of Canada Governor Stephen Poloz admitted last month all of that borrowed money is a primary concern for him, listing it as one of four things keeping him up at night.
"We expect that high levels of debt will make the economy as a whole more sensitive to higher interest rates today than in the past," he said in a speech on Dec. 14.
"This issue has obvious implications for monetary policy, so we have done a lot of work this year to enhance our models to capture it… this is one of the key issues we will be monitoring in real time as we consider the appropriate path for interest rates."
There was some evidence this week that the weight of record debt levels is taking a toll on Canadians. Thirty-three per cent of respondents to an MNP survey said they're not able to cover their monthly bills and debt payments.
"At some point, the Bank of Canada is going to have to put their foot down and say this has to stop," Watson said. "Because at some point we have to get back to a sense of normalcy; so I'm all for these rate hikes that are coming."