The Bank of Canada has enhanced its models to understand the implications high household indebtedness will have on monetary policy, the institution’s governor has said.

In his final speech of the year, Stephen Poloz said high levels of debt would make the Canadian economy “as a whole more sensitive” to higher interest rates than in the past.

“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,” he said.

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