Re-Establishment of the Standard Operating Framework for the Implementation of Monetary Policy
As part of the Bank of Canada's interest rate decision on 1 June 2010, the Bank will re-establish the standard operating framework for the implementation of monetary policy. 1
The key features of this framework are the target for the overnight rate, the operating band, and settlement-balance management. Effective immediately, the target for the overnight rate will be the midpoint of the operating band and the width of the operating band will revert to 50 basis points.
The Bank will conduct Special Purchase and Resale Agreement (SPRA) and Sale and Repurchase Agreement (SRA) operations as necessary to reinforce the target for the overnight rate (see Terms and Conditions). The targeted level of settlement balances will be gradually reduced to the typical level of $25 million according to the following schedule:
- 2 June 2010 – targeted settlement balances will be lowered from $3 billion to $1 billion;
- 9 June 2010 – targeted settlement balances will be further lowered from $1 billion to $200 million; and
- 16 June 2010 – targeted settlement balances will be lowered from $200 million to $25 million.
The Overnight Standing Purchase and Resale Agreement (PRA) Facility, under which Primary Dealers have access to an overnight standing PRA facility at the Bank rate, will be made a permanent part of the standard operating framework. Terms and Conditions can be found at http://www.bankofcanada.ca/en/fixed-dates/2009/rate_210409_2.pdf. This facility was introduced in April 2009 as part of the framework for implementing monetary policy at the effective lower bound for the overnight rate. 2