Household debt has surged at twice the pace of personal disposable income since the depths of the recession. It now stands at 148 per cent of disposable income. These high debt levels represent a threat if the economy does not continue ot recover.  This situation may enable an economic shock to spread throughout the economy. The Bank of Canada has been warning for months now that high consumer debt is worrisome on one general level, but particularly risky for those who may struggle when interest rates inevitably rise.  

So why not just increase interest rates to tone down the debt risks? Raising rates is not based on one factor only; it has to be weighed along with all the other factors that influence economic activity, such as inflation, world and internal macroeconomic conditions, trade, currency, etc. Raising rates at this point may expose Canada to new risks such as a slow down in growth, household defaults, currency appreciation against other currencies, to name a few.