Tag Archive: neutral rate


A Falling Neutral Rate Implies Limited Variable Rate Risk

It’s remarkable how much people focus on the Bank of Canada’s “neutral rate” nowadays. It has become a lighthouse in the rate fog. People rely on it to gauge how far we are from “normal” interest rates. If you’re not familiar with the “neutral rate,” it’s basically the theoretical overnight rate that neither accelerates nor slows the economy and inflation. Last...

Mortgage Rates Under 3% Shine…If Neutral is 2%

BMO Capital Markets has taken a “scalpel to [its] Canadian rate forecast,” as it describes it. The company now projects just one Bank of Canada rate increase in all of 2019. By comparison, financial traders peg the odds of a rate hike this year at just 49%. That’s according to implied probabilities in the bond market, as tracked by Reuters. BMO is...

Canada’s “Neutral Rate” in Perspective

The “neutral rate” has taken on a life of its own. The Bank of Canada is talking about it, analysts are talking about it, the media is talking about it and everyday mortgagors are talking about it. Millions of Canadians, us included, use it as reference when trying to estimate how high rates might go. But the neutral rate is...