What is the monetary policy stance, and what is the yield curve signalling about credit conditions?
The Bank of Canada's policy rate is 2.25%, against 3.63% for U.S. fed funds. Canada's 10-year yield sits 0.62 points above the 2-year.
- Canada · BoC target overnight rate
- 2.25%
- Month to date0 pp vs prior
- U.S. · Effective fed funds rate
- 3.63%
- Aug 20260 pp vs prior
- Canada · 10y minus 2y spread
- 0.62pp
- Month to date−0.1 pp vs prior
- U.S. · 10y minus 2y spread
- 0.46pp
- Aug 2026+0.08 pp vs prior
- Canada · Prime rate
- 4.45%
- Month to date0 pp vs prior
Policy rates
- Canada: BoC target overnight rate (%)
- U.S.: Effective fed funds rate (%)
Yield curve spread, 10-year minus 2-year
- Canada: 10y minus 2y spread (pp)
- U.S.: 10y minus 2y spread (pp)
A negative spread (inverted curve) has preceded most recessions.
Government of Canada benchmark yields
- Canada: GoC 2-year yield (%)
- Canada: GoC 5-year yield (%)
- Canada: GoC 10-year yield (%)
Money supply growth, year over year
- Canada: M1+ (gross) (% y/y)
- Canada: M2++ (gross) (% y/y)
- U.S.: M2 money stock (% y/y)
Household credit growth, year over year
- Canada: Residential mortgage balances (banks) (% y/y)
- Canada: Consumer credit balances (banks) (% y/y)
- U.S.: Real estate loans (banks) (% y/y)
- U.S.: Consumer loans (banks) (% y/y)
Outstanding bank loans. Canada: chartered banks (OSFI A4 return), from mid-2017; U.S.: all commercial banks (real estate loans include commercial property). The January 2019 definition change distorts Canadian mortgage growth during 2019.
Business credit growth, year over year
- Canada: Business loan balances (banks) (% y/y)
- U.S.: Commercial & industrial loans (banks) (% y/y)
Canada: total business loans by chartered banks. U.S.: commercial and industrial loans. Credit growth usually slows when lending standards tighten, and turns before business investment.
Variable-rate share of new Canadian mortgage lending
- Canada: Variable-rate share of new mortgage lending (%)
Variable-rate share of mortgage funds advanced (new loans, renewals and refinancing), 3-month total. Borrowers shift to variable when they expect rate cuts; a higher share also means policy changes reach households faster.
Real policy rates
- Canada: Real policy rate (overnight minus CPI-trim) (%)
- U.S.: Real policy rate (fed funds minus core PCE) (%)
Policy rate minus core inflation (Canada: CPI-trim; U.S.: core PCE). A rough gauge of stance: the Bank of Canada puts the real neutral rate at about 0.25–1.25% and the Fed's longer-run estimate implies about 1%.
U.S. credit spreads and financial conditions
- U.S.: Baa corporate minus 10-year Treasury (pp)
- U.S.: Chicago Fed financial conditions (NFCI) (index), right axis
Baa corporate bond yield minus the 10-year Treasury (left). Chicago Fed NFCI (right): above zero means tighter-than-average conditions. Both widen ahead of and during downturns.
Mortgage rates
- Canada: 5-year conventional mortgage rate (posted) (%)
- U.S.: 30-year fixed mortgage rate (%)
Canada: banks' posted 5-year fixed rate, which sets the mortgage stress test; discounted rates are lower. U.S.: Freddie Mac 30-year fixed. Canadian mortgages renew every few years, so rate changes reach households faster.
U.S. banks tightening business-loan standards
- U.S.: Banks tightening business-loan standards (net %)
Fed Senior Loan Officer Survey: net share of banks tightening standards on loans to large and mid-sized firms. Sustained readings above zero preceded the 1990, 2001 and 2008 recessions.