By taming the financial cycle and by curtailing excessive risk-taking we reduce the misallocation of capital and bring the financial system to perform its main function: the efficient and prudent intermediation from savers to investors – including cross-border intermediation.
While we have been clear that Canadians should expect a rising path for interest rates, seeing their mortgage payments and other borrowing costs increase can be worrying. We will be assessing the impacts of higher interest rates on the economy carefully. We also discussed where rates might end up—how high will they need to go? I know many Canadians have the same question.