It took Mark Carney less than one day to lower the heavy artillery he had just aimed at Canadian consumers.
On Tuesday, the Bank of Canada boss had delivered a severe warning to Canadians, through the central bank's latest monetary-policy-decision statement: In effect, deal with your runaway household debts, or we'll use higher interest rates to deal with them for you.
This was a big deal. The Bank of Canada had been spent months grumbling and nagging and scolding anyone who would listen about how nervous it was with Canada's high and still-growing household debts. But it was just empty talk until Mr. Carney backed it up with an implied threat that he was willing to use higher interest rates to force consumers to straighten up and fly right.
And then he backed down.
In a news conference Wednesday, in conjunction with the Bank of Canada's quarterly Monetary Policy Report, Mr. Carney assured consumers and the financial markets that the use of rates to instill debt discipline was a last resort for the bank, one it would use only if other government regulatory avenues, such as the recent tighter mortgage-lending rules, had been exhausted.
And besides, he said, the regulatory efforts so far are doing the trick and the problem will probably solve itself. The bank believes household credit growth and debt levels will moderate over the next couple of years, as the new mortgage rules and a housing slowdown ease the upward pressures on mortgage debt.
So, really, Tuesday's statement was a very loud scold. A central banking equivalent to "If I have to stop this car …"
It's hard to blame Mr. Carney for trying. The Bank of Canada has had success in the past using similar wars of words to sway the wayward behaviour of currency traders, without having to use the heavy hand of an intervention in the forex market to force the issue.
But traders understand that central banker's talk is an implied prelude to action. They respond because they know that not doing so could leave them on the wrong side of market sentiment, seriously hurting their pocketbooks.
Consumers, however, really don't care much what a suit in an ivory tower in Ottawa tells them they should be doing with their money. To most Canadians, the Bank of Canada's actions matter much, much more than its words.
And what has been the Bank of Canada's biggest action, by far, in terms of influencing consumer credit? A policy interest rate of 1 per cent. No matter what Mr. Carney says, he can't change the fact that in an effort to keep Canada's sluggish economy well stoked, he has kept rates at such a low level that they practically beg consumers to borrow.
Unless Mr. Carney is willing to back his words with rate action, they'll ring hollow with consumers. And despite the grand gesture in Tuesday's policy statement, it's now pretty clear that we're a long, long way from such action.