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Policy instrument


Target for the Overnight Rate

The average rate that the Bank wants to see in the market for overnight money market financing. When the Bank changes the Overnight Rate Target, this change usually affects other interest rates, including mortgage rates and prime rates charged by commercial banks. This rate is also the most appropriate rate to use when making international comparisons. It corresponds to the U.S. fed funds target, the two-week repo rate at the Bank of England, and the minimum bid rate for refinancing operations (the Repo Rate) at the European Central Bank.

Note: The Overnight Rate Target is at the bottom of the Bank’s operating band. The top of the operating band, the Bank Rate, is the rate charged by the Bank on Lynx advances to financial institutions. The bottom of the band is the rate paid by the Bank on any Lynx balances held overnight by those institutions.

overnight rate; overnight money market financing rate

The rate at which major participants in the money market borrow and lend one-day funds to each other.

The overnight money market financing rate is an estimate compiled by the Bank of Canada. This measure includes funding of the major money market dealers through general collateral buyback arrangements (repo) including special purchase and resale agreements with the Bank of Canada and funding through call loans and swapped foreign exchange funds. Prior to 1996, data exclude all repo activity with the exception of those arranged directly with the Bank of Canada. These latter have been included in the calculation since 1995.