Neutral Rate Gap Narrows Between Canada and US Amid Inflation Concerns

The neutral interest rate gap between Canada and the US has narrowed in recent years. According to economic analysis, this gap widened due to various factors allowing the American economy to tolerate higher real and nominal yields than Canada's. Federal Reserve Governor Lisa Cook stated that she is ready to support an interest rate hike unless inflation numbers improve, as 'inflation is too high' and poses a greater risk to the dual mandate. This statement suggests that policymakers are closely watching inflation rates. Fitch Ratings also weighed in on the yen's weakness, stating that it doesn't primarily stem from monetary policy positions between the US and Japan.