{"id":21255,"date":"2022-05-02T12:53:59","date_gmt":"2022-05-02T12:53:59","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2022\/05\/02\/canadian-financial-system-can-absorb-shock-of-higher-interest-rates\/"},"modified":"2022-05-02T12:53:59","modified_gmt":"2022-05-02T12:53:59","slug":"canadian-financial-system-can-absorb-shock-of-higher-interest-rates","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2022\/05\/02\/canadian-financial-system-can-absorb-shock-of-higher-interest-rates\/","title":{"rendered":"Canadian financial system can &#8216;absorb&#8217; shock of higher interest rates"},"content":{"rendered":"<div style=\"text-align:center\"><\/div><p> \n<\/p>\n<div id=\"\">\n<header aria-label=\"Beginning of Article\" class=\"article-header\">\n<nav aria-label=\"Breadcrumb\" class=\"breadcrumbs\">\n<h2 class=\"visually-hidden\">Breadcrumb Trail Links<\/h2>\n<ol class=\"breadcrumbs__items list-unstyled\">\n<li class=\"breadcrumbs__item\"> News <\/li>\n<li class=\"breadcrumbs__item\"> FP Finance <\/li>\n<li class=\"breadcrumbs__item\"> FP Economy <\/li>\n<li class=\"breadcrumbs__item\"> Banking <\/li>\n<\/ol>\n<\/nav>\n<p class=\"article-subtitle\"> Kevin Carmichael: Months ahead will test our bullet-proof banks reputation when debt-service costs rise as five-year mortgages reset <\/p>\n<figure class=\"featured-image\"><picture class=\"featured-image__ratio\"><\/picture><figcaption class=\"featured-image__caption image-caption\"><span class=\"caption\">Bank and office towers in Toronto&#8217;s financial district.<\/span> <span class=\"credit\">Photo by Peter J. Thompson\/National Post<\/span> <\/figcaption><\/figure>\n<\/header>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>The head of Canada\u2019s federal banking regulator said a decade of \u201ctightening the screws\u201d has left the financial system ready for the coming shock of higher interest rates.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment5534080233838438569826569022457888\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment5534080233838438569826569022457888\">Advertisement 2<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-2\">\n<div class=\"ad__inner__container\" data-ad=\"[[6,6],[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-interscroller=\"6x6\" data-ad-loc=\"2\" data-ad-mobile=\"[[6,6],[320,50],[300,50],[300,250],[300,600]]\" id=\"ad-2\" style=\"--desktopHeight:250px;--mobileHeight:600px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>\u201cI think the system can absorb it,\u201d Peter Routledge, the superintendent of financial institutions, said in an interview.<\/p>\n<p>Assertions of that nature can come back to haunt. Think mission accomplished, budgets balance themselves, or inflation is transitory.<\/p>\n<p data-async=\"\">Routledge, a former bank analyst at National Bank Financial, was responding to a question about how inflation and the Bank of Canada\u2019s accelerated march to a more normal interest rate setting looks from the Office of the Superintendent of Financial Institutions (OSFI), which oversees some 350 lenders, trusts, and insurers.<\/p>\n<p data-async=\"\">The central bank raised its benchmark interest-rate a half point last month, and governor Tiff Macklem indicated during testimony at the House finance committee on April 25 that he and his deputies probably will execute another half-point increase at their next policy announcement on June 1. That would put the benchmark rate at 1.5 per cent, compared with 0.25 per cent at the start of the year, and Macklem has said on numerous occasions in recent weeks that getting inflation under control could require pushing the rate past three per cent.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment2084751654302755359765227679953406\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment2084751654302755359765227679953406\">Advertisement 3<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-3\">\n<div class=\"ad__inner__container\" data-ad=\"[[7,7],[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-interscroller=\"7x7\" data-ad-loc=\"3\" data-ad-mobile=\"[[7,7],[300,250],[320,50],[300,50]]\" id=\"ad-3\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>\u201cThe Canadian economy is in good shape,\u201d Macklem said. \u201cIt can handle higher interest rates. It needs higher interest rates.\u201d<\/p>\n<p>The months ahead will test Canada\u2019s reputation for fostering bullet-proof banks. Routledge boasted that no Canadian financial institution failed during (or after) the financial crisis of 2008-09, while nearly 500 American lenders have collapsed over the past 13 years. But Canadian lenders hadn\u2019t spent the years that preceded the Great Recession indulging our lust for real estate to the degree they have over the past decade.<\/p>\n<p>That debt was accumulated during a period of unusually low interest rates; so low, that many first-time borrowers will have no comprehension of the level of debt-service costs that await them when their five-year mortgages reset. Delinquencies could spike, which could trigger a homegrown financial crisis. A less violent threat is domestic consumption slowly shrinks as overstretched households are forced to commit a greater amount of their disposable income to mortgage payments. Both scenarios could cause a recession.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment3858539282048170915731221814269917\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment3858539282048170915731221814269917\">Advertisement 4<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-4\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"4\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" id=\"ad-4\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<figure class=\"embedded-image\"><picture class=\"embedded-image__ratio\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" fifu-lazy=\"1\" fifu-data-sizes=\"auto\" fifu-data-srcset=\"https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=75&resize=75&ssl=1 75w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=100&resize=100&ssl=1 100w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=150&resize=150&ssl=1 150w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=240&resize=240&ssl=1 240w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=320&resize=320&ssl=1 320w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=500&resize=500&ssl=1 500w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=640&resize=640&ssl=1 640w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=800&resize=800&ssl=1 800w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=1024&resize=1024&ssl=1 1024w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=1280&resize=1280&ssl=1 1280w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1&w=1600&resize=1600&ssl=1 1600w\" alt=\"Homes in Toronto.\" class=\"embedded-image__image lazyload\" fifu-data-src=\"https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288&ssl=1\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=288,\n                https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/05\/homes-vw0502.jpg?quality=90&strip=all&w=576 2x\" height=\"750\" loading=\"lazy\" width=\"1000\"\/><\/picture><figcaption class=\"image-caption\"><span class=\"caption\"> Homes in Toronto.<\/span> <span class=\"credit\">Photo by James MacDonald\/Bloomberg<\/span> <\/figcaption><\/figure>\n<p>\u201cConsumer spending and some sectors of housing investment will face some important headwinds in the coming years,\u201d Charles St-Arnaud, chief economist at Alberta Central and a former Bank of Canada staffer, said in a report last month. \u201cAs a result, there is a risk that growth will be weaker than currently expected. For the overall growth outlook, the question is whether business investment and exports can grow sufficiently to compensate for this weakness.\u201d<\/p>\n<p>Routledge\u2019s confidence that the financial system will remain a firewall against worst-case scenarios shouldn\u2019t be confused with complacency.<\/p>\n<p>He said during the interview that he \u201ckind of\u201d agrees with former Bank of Canada governor Stephen Poloz\u2019s contention that worries over high debt levels are rooted in attitudes that haven\u2019t changed since the Great Depression, and therefore discount the extent to which financial innovation \u2014 and more sophisticated approaches to regulation \u2014 has made it possible for households to live off credit.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment2266399018643927543623490917006719\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment2266399018643927543623490917006719\">Advertisement 5<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-5\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"5\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" id=\"ad-5\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>Yet Routledge said he was unwilling to let down his guard on the basis of a theory, no matter how persuasive it might sound. \u201cI kind of agree with Stephen, but I can\u2019t buy into that 100 per cent because my job requires me not to,\u201d he said.<\/p>\n<p>OSFI\u2019s job is maintaining confidence in the financial system by keeping banks and insurers out of trouble. Its clean sheet when it comes to bankruptcies has much to do with the way it approaches regulation. Alan Greenspan, the former chair of the Federal Reserve, the U.S.\u2019s central bank and regulator of the biggest financial institutions, assumed (wrongly) that banks could be trusted to self-regulate. OSFI was never seduced by that philosophy. It issues guidelines that leave it with room to be as prescriptive as necessary. \u201cIt\u2019s hard to get a bank licence,\u201d Routledge said. \u201cPart of the reason it\u2019s hard is because we have really high standards.\u201d<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment6636389009477782507211340710042032\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment6636389009477782507211340710042032\">Advertisement 6<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-6\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"6\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" id=\"ad-6\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>That \u201cprinciples-based\u201d approach to regulation results in iterative rule changes such as the stress test that borrowers must pass before they can get an insured mortgage. You could argue that the stress test should have been applied sooner, as regulation has been a couple of steps behind throughout the era of ultra-low interest rates. But the finance minister \u2014 a member of Parliament from the Greater Toronto Area for the duration of Canada\u2019s housing frenzy \u2014 would have had to make that call. OSFI is a \u201cmicro-prudential\u201d regulator, not a \u201cmacro-prudential\u201d one. It issued the stress test when it determined the lenders it oversees were becoming too loose with their definitions of who should qualify for a mortgage.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment9846162644949963108193247706282443\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment9846162644949963108193247706282443\">Advertisement 7<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-7\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"7\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" id=\"ad-7\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<section aria-labelledby=\"moreTopicLabel4198607024839061715853671112595929\" class=\"more-topic\" data-carousel-component=\"\" data-carousel-icon-button=\"\" data-carousel-type=\"list\"> <button aria-hidden=\"true\" class=\"more-topic__button-prev\" data-carousel-prev=\"\" tabindex=\"-1\" title=\"previous\" type=\"button\"\/> <\/p>\n<ol class=\"more-topic__items list-unstyled\" data-carousel-slide-list=\"\" tabindex=\"0\">\n<li class=\"more-topic__item\" data-carousel-item=\"\">  <picture class=\"more-topic__item-image\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" fifu-lazy=\"1\" fifu-data-sizes=\"auto\" fifu-data-srcset=\"https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=75&resize=75&ssl=1 75w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=100&resize=100&ssl=1 100w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=150&resize=150&ssl=1 150w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=240&resize=240&ssl=1 240w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=320&resize=320&ssl=1 320w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=500&resize=500&ssl=1 500w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=640&resize=640&ssl=1 640w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=800&resize=800&ssl=1 800w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=1024&resize=1024&ssl=1 1024w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=1280&resize=1280&ssl=1 1280w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1&w=1600&resize=1600&ssl=1 1600w\" alt=\"Canada's economy grew by 1.1 per cent in February from the month before, the largest growth rate in almost a year, Statistics Canada said Friday. \" class=\"lazyload\" fifu-data-src=\"https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80&ssl=1\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=96&strip=all&quality=80,\n                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=192&strip=all&quality=80 2x,\n                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/gdp0429.jpeg?h=288&strip=all&quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"> <span class=\"more-topic__item-text-clamp\"> Canada\u2019s economy poised to grow in the first quarter, dodging America\u2019s fate <\/span> <\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\">  <picture class=\"more-topic__item-image\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" fifu-lazy=\"1\" fifu-data-sizes=\"auto\" fifu-data-srcset=\"https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=75&resize=75&ssl=1 75w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=100&resize=100&ssl=1 100w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=150&resize=150&ssl=1 150w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=240&resize=240&ssl=1 240w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=320&resize=320&ssl=1 320w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=500&resize=500&ssl=1 500w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=640&resize=640&ssl=1 640w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=800&resize=800&ssl=1 800w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=1024&resize=1024&ssl=1 1024w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=1280&resize=1280&ssl=1 1280w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1&w=1600&resize=1600&ssl=1 1600w\" alt=\"Bank of Canada Governor Tiff Macklem acknowledged he and his lieutenants misjudged the strength of inflation at the start of the year.\" class=\"lazyload\" fifu-data-src=\"https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80&ssl=1\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=96&strip=all&quality=80,\n                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=192&strip=all&quality=80 2x,\n                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/tiff-macklem-0428.jpg?h=288&strip=all&quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"> <span class=\"more-topic__item-text-clamp\"> Tiff Macklem acknowledges misjudging inflation, pledges to act \u2018forcefully\u2019 to bring it down <\/span> <\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\">  <picture class=\"more-topic__item-image\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" fifu-lazy=\"1\" fifu-data-sizes=\"auto\" fifu-data-srcset=\"https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=75&resize=75&ssl=1 75w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=100&resize=100&ssl=1 100w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=150&resize=150&ssl=1 150w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=240&resize=240&ssl=1 240w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=320&resize=320&ssl=1 320w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=500&resize=500&ssl=1 500w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=640&resize=640&ssl=1 640w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=800&resize=800&ssl=1 800w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=1024&resize=1024&ssl=1 1024w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=1280&resize=1280&ssl=1 1280w, https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1&w=1600&resize=1600&ssl=1 1600w\" alt=\"The Bank of Canada in Ottawa.\" class=\"lazyload\" fifu-data-src=\"https:\/\/i3.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80&ssl=1\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=96&strip=all&quality=80,\n                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=192&strip=all&quality=80 2x,\n                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/04\/no0426inflation.jpg?h=288&strip=all&quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"> <span class=\"more-topic__item-text-clamp\"> What rapidly rising inflation tells us about the economy <\/span> <\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\">  <picture class=\"more-topic__item-image\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" fifu-lazy=\"1\" fifu-data-sizes=\"auto\" fifu-data-srcset=\"https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=75&resize=75&ssl=1 75w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=100&resize=100&ssl=1 100w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=150&resize=150&ssl=1 150w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=240&resize=240&ssl=1 240w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=320&resize=320&ssl=1 320w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=500&resize=500&ssl=1 500w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=640&resize=640&ssl=1 640w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=800&resize=800&ssl=1 800w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=1024&resize=1024&ssl=1 1024w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=1280&resize=1280&ssl=1 1280w, https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1&w=1600&resize=1600&ssl=1 1600w\" alt=\"Bank of Canada governor Tiff Macklem and senior deputy governor Carolyn Rogers arrive to testify at a parliamentary finance committee meeting in Ottawa, on Monday.\" class=\"lazyload\" fifu-data-src=\"https:\/\/i1.wp.com\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80&ssl=1\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=96&strip=all&quality=80,\n                                    https:\/\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=192&strip=all&quality=80 2x,\n                                    https:\/\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/04\/macklem-vw0425.jpg?h=288&strip=all&quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"> <span class=\"more-topic__item-text-clamp\"> Macklem hints at a second half-point rate hike, while dousing talk he could go bigger <\/span> <\/h3>\n<\/li>\n<\/ol>\n<p><button aria-hidden=\"true\" class=\"more-topic__button-next\" data-carousel-next=\"\" tabindex=\"-1\" title=\"next\" type=\"button\"\/> <\/section>\n<p>For years, the most fatalistic observers of the Canadian housing scene have been pointing out how Canada\u2019s household debt levels mirror those of the U.S. before that country\u2019s real-estate bust triggered the financial crisis. Routledge said he doesn\u2019t mind such alarmism because it keeps people alert to what could go wrong. But the then-and-now charts that portend disaster in Canada leave little room for nuance. Routledge reckons housing markets will remain buoyant as long as immigration rates exceed the pace at which we\u2019re building new homes. Another important difference is regulation, and specifically the mortgage stress test.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment1577551837647804055729810480712887\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment1577551837647804055729810480712887\">Advertisement 8<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-8\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"8\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" id=\"ad-8\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>\u201cWe\u2019ve constantly been tightening the screws,\u201d Routledge said.\u00a0\u201cHere\u2019s the difference between 2008 in the United States and 2022 in Canada. Through the boom years, we\u2019re tightening underwriting standards. In the United States, they were loosening them.\u201d<\/p>\n<p>Policymakers and regulators learn from mistakes. The Great Recession taught many lessons, even to those who weren\u2019t directly involved. One of the learnings for Routledge is to stay awake. Among the newer issues on OSFI\u2019s agenda are ensuring banks are ready of cyber attacks and adjusting to ensure increasing competition for financial technology companies occurs in a regulated environment. OSFI is also studying whether the stress test should be expanded beyond mortgages, specifically combined loan products that are based on a borrower\u2019s home loan.<\/p>\n<p>\u201cYou never want to say, \u2018All clear,&#8217;\u201d Routledge said.<\/p>\n<p data-async=\"\"><em>\u2022 Email: kcarmichael@postmedia.com | Twitter: <a class=\"\u201ctwitter-follow-button\u201d\" data-evt=\"click\" data-evt-typ=\"click\" data-evt-val=\"{\" control_fields=\"\" link=\"\" href=\"https:\/\/twitter.com\/carmichaelkevin\" rel=\"nofollow noopener\" target=\"_blank\">carmichaelkevin<\/a><\/em><\/p>\n<p> <iframe loading=\"lazy\" frameborder=\"0\" height=\"500\" id=\"\" src=\"https:\/\/modules.wearehearken.com\/financial-post\/embed\/9353\/share\" style=\"--height: 500px; \" width=\"\"><\/iframe> <\/p>\n<\/section>\n<section class=\"article-content__share-group article-delimiter\" data-evt=\"beforeunload\" data-evt-typ=\"page_scroll\" data-evt-val=\"{\" control_fields=\"\">\n<h2 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