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ANALYSIS

The old debate about whether central banks should raise rates to counteract housing bubbles is finding new life in Canada as the country copes with runaway prices in its two biggest real estate markets.

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Home prices in Toronto are up 32 per cent over the past year and have more than doubled since the recession. In Vancouver, which is an even pricier city, they’ve climbed 58 per cent over four years. Meanwhile, household debt is at record levels, recently surpassing gross domestic product for the first time.

Lawmakers at every level have tried with a succession of tailored policies to engineer a slowdown, but have fallen short of achieving the desired effect.

Could now be the time for the Bank of Canada, headed by Stephen Poloz, which releases its bi-annual analysis of financial stability risks Thursday, to step in with higher borrowing costs to “lean against” the bubble, even at the expense of its inflation target?