Bank of Canada Announces Lower Target for Settlement Balances to Reinforce the Target for the Overnight Rate
Effective Thursday, 22 March 2018, the Bank is reducing the target for the minimum daily level of settlement balances to $250 million, from its current level of $500 million.
Various indicators of the overnight interest rate have been slightly, but persistently, below the Bank’s target for the overnight rate. Today’s announced measure is designed to counter that persistent trend, and to reinforce the Bank’s target for the overnight rate1 by encouraging market participants to trade overnight balances with each other at levels closer to the target rate.
The Bank continues to monitor conditions in the overnight market, and will conduct overnight repos or overnight reverse repos, as needed. The Bank may also further adjust the target level of settlement balances, depending on conditions in the overnight market.
Information on Large Value Transfer System settlement balances, including any further changes to the target settlement balances and any market intervention is available in the Market Operations Indicators section of the Bank’s website.
For further information, please contact:
Bank of Canada
Financial Markets Department