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
How Indigenous-owned firms finance their operations Sparks at Bank article James Fudurich, Calista Cheung, Farrukh Suvankulov, Selam Abraham Businesses that can’t easily access credit experience slower growth. Indigenous-owned firms are less likely than other firms in Canada to use conventional lending products—like loans or lines of credit from banks. We look at why Indigenous-owned businesses may face barriers to accessing credit. Content Type(s): Staff research, Sparks at Bank article Research Theme(s): Financial system, Household and business credit, Monetary policy, Monetary policy framework and transmission
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
Unpacking interest rate uncertainty in 2025 Staff analytical paper 2026-25 Harshbir Kaur, Rishi Vala Amid heightened Canada–US trade tensions in 2025, financial markets showed signs that investors had greater difficulty anticipating near-term Bank of Canada interest rate decisions. We look at the Overnight Index Swap prices and intraday Government of Canada yields to identify the main driver of uncertainty around interest rate decisions. Content Type(s): Staff research, Staff analytical paper JEL Code(s): C, C5, C58, D, D5, D53, E, E4, E44, E5, E52, E58 Research Theme(s): Financial markets and funds management, Market functioning, Models and tools, Econometric, statistical and computational methods, Monetary policy, Monetary policy framework and transmission
Deglobalization and Trade Fragmentation: Implications for the Inflation-Output Trade-Off Staff analytical paper 2026-24 Matteo Cacciatore, Daniela Hauser, Yuko Imura How do deglobalization and rising trade costs affect monetary policy? A two-country, multi-sector model of Canada and the United States shows that bilateral trade-cost shocks generate a manageable inflation–output trade-off under the existing framework — but larger or more persistent shocks would make look-through policies costlier and riskier. Content Type(s): Staff research, Staff analytical paper JEL Code(s): D, D5, D57, E, E5, E52, E58, F, F1, F13, F4, F41, F6, F62 Research Theme(s): Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation, Structural challenges, International trade, finance and competitiveness
Recent Evidence on the Resiliency of Flexible Inflation Targeting Staff analytical paper 2026-23 Edoardo Briganti, Wei Dong, Olena Kostyshyna, Soyoung Lee, Florent Samson, Rodrigo Sekkel This paper assesses the resilience of flexible inflation targeting in the presence of large and persistent supply shocks. Content Type(s): Staff research, Staff analytical paper JEL Code(s): E, E5, E52 Research Theme(s): Monetary policy, Monetary policy framework and transmission
Optimal Conventional and Unconventional Monetary Policy Mix Staff working paper 2026-18 Sami Alpanda, Serdar Kabaca, Kostas Mavromatis We show that in a heterogeneous economy, optimal policy after cost-push shocks raises short-term rates to curb inflation while lowering long-term rates to support indebted households, speeding investment and output recovery while increasing consumption inequality. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E40, E43, E5, E52 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation
Assessing the US and Canadian neutral rates: 2026 update Staff analytical paper 2026-21 Felipe Alves, William Beaudoin, Hélène Desgagnés, Wei Dong, Jan David Schneider, Eugene Trostin, Argyn Toktamyssov, Hannes Twieling We assess the Canadian nominal neutral rate to be in the range of 2.25% to 3.25%, unchanged from our assessment in 2025. We assess the US nominal neutral rate to be in the range of 2.50% to 3.50%, somewhat higher than the range of 2.25% to 3.25% reported in the 2025 assessment. Content Type(s): Staff research, Staff analytical paper JEL Code(s): E, E4, E43, E5, E52 Research Theme(s): Monetary policy, Monetary policy framework and transmission
Communicating the Future Direction of Policy Staff analytical paper 2026-16 Jonathan Witmer, Monica Jain This note discusses several ways the BoC could increase communication around future policy, leveraging methods other central banks have used, and discussing the pros and cons of each method for the BoC, keeping in mind that policy rate forecasts typically are not informative beyond 1 or 2 quarters. Content Type(s): Staff research, Staff analytical paper JEL Code(s): D, D8, D83, E, E5, E58 Research Theme(s): Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation