7  - 10 estimates.8 And when we look at our own models, our most recent analysis suggests Canada’s neutral rate has not drifted much from its pre-pandemic range and currently lies around 0%–1% in real terms, or 2%–3% in nominal terms.9 Those ranges are our base case for where we think short-term rates will settle once inflation returns to normal.
However, the risks around that base case are tilted to the upside. Looking across the four forces I just listed, there are good reasons to believe that some may be reaching a plateau or even changing course. That makes it unlikely the real neutral rate will fall below pre-pandemic estimates and creates a meaningful risk that it could go up.10 Take demographics and aging.