When supply shocks make inflation harder to control Sparks at Bank article Oleksiy Kryvtsov, Rodrigo Sekkel Supply disruptions were a key driver of inflation during the pandemic. If such disruptions occur more often in the future, they could lead to more frequent and persistent periods of high inflation. Central banks could then find it harder to bring inflation back to target while supporting economic activity. Content Type(s): Staff research, Sparks at Bank article Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Time Use and Consumption Expenditures Staff working paper 2026-29 Daniela Hauser, Stefano Gnocchi, Laure Simon This paper shows that consumption activities toward which households reallocate more time in recessions see larger expenditure declines, revealing a systematic link between time-use and expenditure cyclicality. A two-sector New Keynesian model shows this time-expenditure substitution explains roughly forty percent of consumption's response to monetary policy shocks. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D1, D12, E, E2, E21, E3, E32, E5, E52, J, J2, J22 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Monetary Policy in an AI-Driven Two-Speed Economy Staff working paper 2026-27 Joshua Brault, Maryam Haghighi, Jing Yang We analyze monetary policy responses to AI in a two-sector New Keynesian model, distinguishing augmentation and automation. Both reduce labor demand, requiring accommodation that creates inflation trade-offs. Automation worsens them. Aggregate inflation depends on AI’s form and breadth, making policy stabilization more complex and aggregate data potentially misleading. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E24, E3, E31, E32, E5, E52, J, J2, J23, O, O3, O33 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Structural challenges, Digitalization and productivity
Monetary Policy Challenges in a Volatile World Staff analytical paper 2026-34 Stefano Gnocchi, Matteo Cacciatore Rising volatility and structural shifts—deglobalization, climate risks, and AI—are reshaping inflation and policy trade-offs. Evidence suggests central banks can accommodate supply-driven inflation while balancing inflation and output, as long as expectations stay anchored and policy reflects shock size, persistence, and broader economic conditions. Content Type(s): Staff research, Staff analytical paper JEL Code(s): E, E3, E31, E32, E5, E52, E58 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Structural challenges, Climate change, International trade, finance and competitiveness
Assessing risks to oil prices through options markets Sparks at Bank article Harshbir Kaur, Eugene Trostin, Rishi Vala After the war in the Middle East began, futures markets hinted at how long oil prices could stay above their pre-war levels. Options on those futures further reveal how investors see the range and balance of risks around future oil prices—which helps central banks assess risks to inflation. Content Type(s): Staff research, Sparks at Bank article Research Theme(s): Financial markets and funds management, Market functioning, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Supply and Demand-Driven inflation: Decomposition and policy implications Staff analytical paper 2026-33 Kira Kang, Rodrigo Sekkel, Temel Taskin, Jing Yang This note uses detailed expenditure data to decompose Canadian inflation into supply- and demand-driven components. The analysis sheds light on the drivers of post-pandemic inflation and shows that monetary policy primarily affects and responds to demand-driven inflation. Content Type(s): Staff research, Staff analytical paper JEL Code(s): E, E3, E31, E5, E52, E58 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
The Price Impact of Canadian Retaliatory Tariffs Staff working paper 2026-22 Alberto Cavallo, Olena Kostyshyna, Oleksiy Kryvtsov, Matías Vieyra How do import tariffs affect retail prices? We combine daily product-level posted prices from seven major Canadian retailers with product-level tariff exposure to estimate tariff effects. Prices of tariffed goods rose gradually, peaking at 6% after three months, implying pass-through of roughly one quarter of the 25% tariff. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E31, E5, E52, F, F1, F13 Research Theme(s): Monetary policy, Inflation dynamics and pressures
Monetary Policy in a Volatile World: ToTEM Simulations Staff analytical paper 2026-27 Edward Booth, Edouard Djeutem, Oleksiy Kryvtsov, Fanny McKellips, Yang Zhang Using simulations of the Bank of Canada’s projection model, we assess inflation risks from greater supply-shock volatility and show that monetary policy faces sharper trade-offs, as stabilizing inflation increasingly comes at the cost of weaker real activity. Content Type(s): Staff research, Staff analytical paper JEL Code(s): E, E3, E31, E32, E5, E52, E58 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
How Canada’s counter-tariffs impacted consumer prices Sparks at Bank article Alberto Cavallo, Olena Kostyshyna, Oleksiy Kryvtsov, Matías Vieyra For six months in 2025, Canada imposed counter tariffs on a wide range of goods from the United States. This short and well defined episode offers a unique opportunity to examine how Canadian retailers adjust prices in response to tariffs—and how retailers’ expectations and transparency with consumers affect pricing decisions. Content Type(s): Staff research, Sparks at Bank article Research Theme(s): Monetary policy, Inflation dynamics and pressures, Structural challenges, International trade, finance and competitiveness
Canada’s shifting position in global maritime trade Sparks at Bank article Geoffrey R. Dunbar, Patrick McKelvey, Tessa Peer, Walter Steingress, Ben Tomlin Canada’s economic prosperity depends on trade. But global maritime shipping networks have been reshaped in ways that have reduced Canada’s relative connectivity and carrying capacity. This less-central role for the country could mean greater exposure to supply chain disruptions that could increase the cost of doing business. Content Type(s): Staff research, Sparks at Bank article Research Theme(s): Monetary policy, Inflation dynamics and pressures, Structural challenges, International trade, finance and competitiveness