Sibley Creek Section 5 of 7 Policy
What is the policy stance, and is it consistent with the cycle?
Latest release BoC rate decision, TK
Six plates trace the Canadian policy stance, monetary and fiscal: the rate decision and its market path, the spread to the Fed, the balance sheet, the federal trajectory, and where the cyclically-adjusted fiscal stance sits relative to the cycle.
Plate 01 BoC overnight rate
As of TK (latest rate decision)
BoC overnight rate at TK following the latest decision.
The Bank moved TK to TK. The current setting sits relative to the latest MPR neutral range as described in the statement; further easing would push policy into accommodative territory. Action state described in the most recent communique.
Plate 02 Market path: 2y GoC vs overnight
As of TK
Two-year GoC pricing relative to overnight rate as described in latest MPR.
The 2-year GoC is trading TK relative to the current overnight rate, consistent with TK of easing priced over the next twelve months. The MPR's market-implied curve, refreshed quarterly, remains the primary-source-grade reference for the OIS-implied path; we do not reconstruct OIS forwards in v1 basics.
Plate 03 BoC-Fed spread, 2-year
As of TK
Spread at TK, near the TK percentile of the post-1990 distribution.
The Canada-US 2-year spread is at TK as the Bank cuts faster than the Fed. On 35+ years of daily data, the current level sits near the TK percentile of the absolute-value distribution - wide, but not at the limits the literature flags as the breakpoint where the FX channel forces a back-off.
Plate 04 Balance sheet: settlement balances and asset composition
As of TK (weekly statement)
Phase: floor maintenance; settlement balances at the new operating range.
The Bank exited passive quantitative tightening in 2025; the system is now in floor-maintenance phase, with settlement balances stable near the operating range communicated in the Bank's December 2024 framework statement. Asset composition reflects amortization of legacy GBPP holdings.
Plate 05 Federal trajectory: deficit YTD and debt-service costs
As of TK (Fiscal Monitor)
Year-to-date deficit running TK relative to budget plan.
The federal deficit, year-to-date, is TK, roughly TK relative to the FES plan implied at the same point. Debt-service costs continue to grow faster than revenues. The PBO's most recent Economic and Fiscal Outlook projects a wider full-year balance than the FES baseline.
Plate 06 Fiscal stance vs cycle (CAPB)
As of IMF Article IV / OECD Economic Survey, latest
Cyclically-adjusted balance has been modestly expansionary against a closing output gap.
Canada's Department of Finance does not publish a cyclically-adjusted primary balance; we cite the IMF Article IV and the OECD Economic Survey, which both put the recent CAPB in modestly expansionary territory. Against an output gap that is closing slowly, that stance is mildly procyclical at the margin. Methodology footnote names the source.