Fed Funds vs Bank of Canada Overnight Rate
The Federal Funds target range sits at 3.50 to 3.75 percent following the April 29, 2026 FOMC hold, while the Bank of Canada held its policy rate at 2.25 percent the same morning. The 125 to 150 basis point US premium is the widest sustained Fed-BoC gap since the 1995 to 1997 episode and has driven USD/CAD from 1.31 in September 2024 to 1.36 on April 30, 2026.
Also known as: Federal Funds Rate (fed rate, interest rate) · Canada Overnight Rate Target (BoC rate, Canada policy rate, Canada overnight rate, Bank of Canada rate)
Why This Comparison Matters
The Federal Funds target range sits at 3.50 to 3.75 percent following the April 29, 2026 FOMC hold, while the Bank of Canada held its policy rate at 2.25 percent the same morning. The 125 to 150 basis point US premium is the widest sustained Fed-BoC gap since the 1995 to 1997 episode and has driven USD/CAD from 1.31 in September 2024 to 1.36 on April 30, 2026. The April 29 BoC statement explicitly cited Iran-driven oil pressure as a watch item rather than a hike trigger, while the FOMC statement leaned the same direction with three dissents. Reading the spread requires separating the cyclical divergence from the structural fact that since the BoC rate was reintroduced in 1996, Canada has spent roughly 60 percent of months below US policy.
Where the Fed-BoC spread sits in April 2026
The Federal Reserve held its target range at 3.50 to 3.75 percent on April 29, 2026, the second consecutive pause after 100 basis points of cuts between September and December 2024. The Bank of Canada held its overnight rate target at 2.25 percent the same morning, the second consecutive hold after cutting 275 basis points from the 5.00 percent peak between June 2024 and March 2026. The current 125 to 150 basis point US premium ranks in the 88th percentile of all monthly observations since 1996, and is the widest sustained gap since the September 1995 to October 1997 window when the Fed averaged roughly 200 basis points above the BoC.
The spread crossed zero in March 2024 (Fed at 5.50, BoC at 5.00) and has widened steadily as the BoC cut faster than the Fed. As of April 30, 2026, the BoC has delivered seven cuts in this cycle versus four for the Fed, the largest cumulative gap in cycle-to-cycle BoC outpacing of the Fed since the BoC overnight rate target was introduced in 1996. The Bank of Canada Valet series V39079 publishes the official daily target rate; the FOMC publishes the target range through the H.15 release.
Why the BoC has cut faster than the Fed in this cycle
Two domestic factors drove the BoC ahead of the Fed in 2024 to 2025. First, the Canadian household debt-to-disposable-income ratio reached 184 percent in Q4 2023, more than double the US ratio of 95 percent. Variable-rate mortgages, which constitute roughly 30 percent of outstanding Canadian residential mortgages, repriced almost in real time to BoC moves, transmitting policy faster than the US fixed-rate channel. Statistics Canada CANSIM data show the share of households spending more than 25 percent of disposable income on debt service rose to 15.4 percent in 2024.
Second, Canadian headline CPI fell to 1.6 percent in February 2025, the first time below the 2 percent target since March 2021, while US CPI was still 2.8 percent on the equivalent print. The shorter Canadian inflation cycle reflected weaker domestic demand and a smaller fiscal impulse: federal program spending in Canada averaged 16.0 percent of GDP in 2024 versus 23.4 percent in the US (OECD economic outlook). The BoC could move ahead because both its inflation and labor-market data signaled looser conditions ahead of the
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Frequently Asked Questions
What is the current Fed-BoC rate spread as of April 2026?+
The Fed funds target range is 3.50 to 3.75 percent (held April 29, 2026); the BoC overnight rate target is 2.25 percent (held April 29, 2026). The midpoint spread is 1.375 percentage points, with the upper-bound spread at 1.50 percentage points. This ranks in the 88th percentile of all monthly observations since 1996 and is the widest sustained gap since the 1995 to 1997 episode.
Why has the BoC cut faster than the Fed in 2024 to 2026?+
Canadian inflation reached the 2 percent target faster (CPI hit 1.6 percent in February 2025), the household debt-to-disposable-income ratio at 184 percent transmitted policy more quickly through variable-rate mortgages, and the smaller fiscal impulse meant aggregate demand cooled sooner. The BoC delivered seven cuts in this cycle versus the Fed's four, the largest cumulative outpacing since the Canadian overnight rate target was reintroduced in 1996.
How does the Fed-BoC spread predict USD/CAD?+
The 2-year US-Canada yield gap correlates more tightly with USD/CAD than the policy-rate gap because it captures expected paths. April 30, 2026 USD/CAD at 1.3614 corresponds to a 100 basis point 2-year gap. Over post-1996 history, every 25 basis points of widening in the 2-year gap has averaged roughly 1.0 to 1.5 cents of USD/CAD appreciation over 6 to 12 weeks, though oil and risk-sentiment shocks can override the rate channel for several weeks at a time.
When has the BoC moved before the Fed historically?+
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