Assessing the US and Canadian neutral rates: 2025 update
We assess both the US and Canadian nominal neutral rates to be in the range of 2.25% to 3.25%, unchanged from the range assessed in 2024.
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3
result(s)
Monetary policy, interest rates and the Canadian dollar
Staff analytical note 2025-2
Jean-Sébastien Fontaine,
Ingomar Krohn,
James Kyeong,
Rishi Vala,
Konrad Zmitrowicz
Changes in domestic interest rates affect the value of the Canadian dollar less than changes in the risk premium do. These variations often occur when a broad shift in risk sentiment occurs in global markets. Ultimately, the value of the currency reflects long-term, slow-moving features of the economies.
Content Type(s):
Staff research,
Staff analytical notes
JEL Code(s):
E,
E4,
E43,
F,
F3,
F31,
G,
G1,
G12
Research Theme(s):
Financial markets and funds management,
International markets and currencies,
Monetary policy,
Monetary policy framework and transmission
Foreign exchange risk premiums and global currency factors
Staff analytical note 2024-20
Ingomar Krohn,
Mariel Yacolca Maguiña
Global currency risk factors continue to explain a large share of the variation in the Canadian dollar during the period following the 2008–09 global financial crisis. We show that they are also systematically important for risk premiums, and only in recent months has the role of idiosyncratic country-specific risks grown.
Content Type(s):
Staff research,
Staff analytical notes
JEL Code(s):
F,
F3,
F31,
G,
G1,
G12
Research Theme(s):
Financial markets and funds management,
International markets and currencies,
Market functioning