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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.

We explore two scenarios for potential output growth to gain insights into the economic consequences associated with different possible trade policies. Scenario 1 includes limited US tariffs on Canadian exports. Scenario 2 adds a permanent, broad-based 25% increase in US tariffs on imports from all countries excluding Canada and Mexico.

This paper analyzes the optimal quantity of central bank reserves in an economy where reserves and other financial assets provide liquidity benefits. Using a static model, I derive a constrained Friedman rule that characterizes the socially optimal level of reserves, demonstrating that this quantity is neither necessarily large nor small but depends on the marginal benefits of reserves relative to alternative safe assets.

Under the consumer-merchant bipartite network, we apply the indirect sampling approach to estimate merchant payment acceptance through a consumer payment diary.

We consider ways central banks could adapt in the event of an increased risk of a dash for cash from asset managers. We explore ideas such as new facilities that ease asset managers’ ability to convert existing assets to cash or new assets with liquidity that central banks would guarantee.

We consider ways central banks could adapt in the event of an increased risk of a dash for cash from asset managers. We explore ideas such as new facilities that ease asset managers’ ability to convert existing assets to cash or new assets with liquidity that central banks would guarantee.

In 2024, the Bank of Canada reviewed and updated its Contingent Term Repo Facility policy, incorporating lessons learned from the COVID-19 pandemic and other global market developments, such as the UK gilt crisis in September 2022. This paper accompanies the March 17, 2025, Contingent Term Repo Facility market notice and provides background information and further details about the design of the revised policy.

We introduce a history of macroprudential policy (MPP) events in Canada since the 1980s. We document the short-run effects of MPP announcements on market-based measures of systemic risk and find that MPPs can influence the market’s perception of large banks’ resilience.

We draw on the Canadian experience to examine how monetary and macroprudential policies interact and possibly complement each other in achieving their respective price and financial stability objectives.

We find that foreign central banks own a large share of Government of Canada (GoC) bonds and tend to hold their positions for longer than other types of asset managers. This buy-and-hold behaviour could offer benefits. For example, foreign central banks may be less likely than other asset managers to sell bonds and add to strains on market liquidity in periods of turmoil. However, foreign central banks’ buy-and-hold behaviour combined with their minimal lending of GoC bonds in securities-financing markets, as observed in our available data, can potentially lower liquidity because fewer GoC bonds are available for others to transact in secondary markets. Indeed, we find that higher levels of foreign central banks’ GoC bond holdings are related to lower liquidity.