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The Bank of Canada will be forced to renew warnings of the possibility for higher interest rates in order to halt a “bubble” from forming in the housing market, according to Pacific Investment Management Co.’s Ed Devlin.

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A new report says the rising tide of debt could bring on renewed financial crisis, decline in living standards, and eventual mass default.





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Governor Stephen Poloz’s removal of language about the potential need to raise rates from the central bank’s policy statements has helped to weaken the currency, spurred inflation and contributed to a pickup in exports. At the same time, the rising home prices and debt levels that caused Poloz’s predecessor Mark Carney to insert a “hawkish bias” into official statements have continued to climb.

With projected rate increases from the Federal Reserve likely to cause the Canadian dollar to fall further and inflation now at the central bank’s 2% target, the Bank of Canada will turn its attention back to risks from excessive consumer debt this year or early next, said Devlin, who oversees $17 billion, including the Canadian portfolios for Pimco, the world’s biggest manager of bond funds.