As the Bank of Canada vows to stay the course with historically low interest rates, policy-makers must keep a close eye on household debt levels, according to a former senior deputy governor of the central bank.

“There certainly is recognition of this in the [Bank of Canada's] Monetary Policy Report. And yes, it’s clearly something that has to be managed and watched very carefully,” said Paul Jenkins, now a senior fellow at the C.D. Howe Institute, Friday in an interview with BNN Bloomberg’s Amanda Lang. Jenkins’s tenure at the Bank of Canada spanned from 2003-10.

“I think it’ll have to continue to be all hands on deck if you’d like to continue to watch for those vulnerabilities,” he said.

He added that the central bank may have to employ new means of monitoring these risks in addition to “the macro credential tools we put in place,” referring to preceding Bank of Canada policies.

His comments come two days after the Bank of Canada announced it is holding its key interest rate at 0.25 per cent and will keep rates at low levels for the foreseeable future as it prioritizes economic recovery from the COVID-19 pandemic.

“If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” Bank of Canada Govenor Tiff Macklem said in a press conference following the rate announcement.

Jenkins also applauded Canada’s various levels of governments for their handling of the pandemic, calling the federal, provincial and local responses forceful and “timely” thus far. 

But he also said ​more can be done to boost consumer confidence. And what’s needed to accomplish that, he said, is better communication on “the intersection of health and the economy.”

“If we have confidence around our progress on the virus being under control, then that’s going to boost our confidence to re-engage in the economy, go out and spend. And likewise, having confidence in terms of employment and incomes is going to strengthen our resolve to continue to behave appropriately. Quite frankly, in the end it’s going to be the behaviour of each and every one of us that’s going to bring us out the other end,” Jenkins said.

“I think the one thing that could be done more forcefully is to have a strong narrative or a story from our policy-makers, our leaders, that will help us ensure we have that confidence, that we understand this intersection, so that as we go forward we’re making progress on both fronts. And you only have to look at other jurisdictions to realize what can happen if that gets out of control.”