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A weighted sum of the changes in the short-term interest rate (the 90-day commercial paper rate) and the exchange rate (as measured by the C-6 index) from a given base period.
NOTE: The weight of the exchange rate is one-third that of the interest rate, a three per cent change in the exchange rate being roughly equivalent to a one percentage point change (100 basis points) in interest rates. A change in the MCI gives a measure of the degree of tightening or easing in monetary conditions.
The rate shown is the Bank of Canada's estimate of operative market trading levels on the date indicated for major borrowers' paper.
The C-6 exchange rate is an index of the weighted- average foreign exchange value of the Canadian dollar against major foreign currencies. (See technical note in the Winter 1998-1999 issue of the Bank of Canada Review, pages 125 and 126.) Weights for each country are derived from Canadian merchandise trade flows with other countries over the three years from 1994 through 1996. The index has been based to 1992 (i.e., C-6 = 100 in 1992). The C-6 index broadens the coverage of the old G-10 index to include all the countries in the EMU.
The Canadian-dollar effective exchange rate index (CERI) is a weighted average of bilateral exchange rates for the Canadian dollar against the currencies of Canada's major trading partners. The CERI replaced the C-6 index in October 2006 as the Bank's new measure of Canada's trade competitiveness.
The six foreign currencies in the CERI are the U.S. dollar, the European Union euro, the Japanese yen, the U.K. pound, the Chinese yuan, and the Mexican peso. Before 1996, the South Korean won was part of the index, but the Chinese yuan was not. Table A gives the weights for the currencies in the CERI.
Unlike the C-6 index, which used bilateral currency-weight calculations, CERI's calculations are multilateral. CERI encompasses trade in goods, services, and non-energy commodities, whereas the C-6 index measured only trade in merchandise. More information.