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Since the global financial crisis, core inflation has been persistently below target in most advanced economies. Recently, it has weakened further in several advanced economies despite gradually diminishing slack. This note reviews recent developments in core inflation across advanced economies and identifies distinctive patterns across regions.

In this issue of the Financial System Review, the Bank of Canada’s Governing Council judges that the risks to the stability of Canada’s financial system are high and have increased markedly over the past six months, owing primarily to an escalation of the sovereign debt crisis in the euro area and a weaker global economic outlook.

Erratum: The data for Chart 7 on page 8 were plotted incorrectly. See revised chart.

Amid heightened Canada–US trade tensions in 2025, financial markets showed signs that investors had greater difficulty anticipating near-term Bank of Canada interest rate decisions. We look at the Overnight Index Swap prices and intraday Government of Canada yields to identify the main driver of uncertainty around interest rate decisions.

The scale of safe assets suggests a structural demand for a safe wealth share beyond transaction and liquidity roles. We study how investors achieve a reference wealth level by combining self-insurance and contingent liquidation of investment. Intermediaries improve upon autarky, insuring investors with poor self-insurance and limiting liquidation.

Central banks communicate the results of open market operations. This helps participants in financial markets more accurately estimate the prevailing demand and supply conditions in the market for overnight loans.

A novel dataset from the Bank of Canada is used to estimate the deposit functions for banknotes in Canada for three denominations: $1,000, $100 and $50. The broad flavour of the empirical findings is that denominations are different monies, and the structural estimates identify the underlying sources of the non-neutrality.

This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.

Our understanding of news shocks is, to a large extent, based on studies that focus empirically on short-run news. This paper brings new insights by analyzing the effects of giant commodity discoveries, which typically materialize over the longer run.

I study the welfare consequences of regulations on high-cost consumer credit in the United States and find that borrowing limits have distributional impacts on households with self-control issues.

Should managers be paid in stock options if they provide stock-market participants with information about the firm? This paper studies how firm owners trade off the benefit of stock-price incentives and better-informed market participants against the cost of potential stock-price manipulation.