Overnight Rate: What it is and why it should matter to you!
What is the “overnight” interest rate?
The Bank of Canada (BOC) carries out monetary policy by influencing short-term interest rates.
By raising and lowering the target for the ‘overnight’ rate they are able to do this.
Financial institutions borrow and lend between each other, doing so they charge interest on funds exchanged, this is called the “overnight” rate.
The BOC sets the target for this rate and is often referred to the Bank’s key interest rate.
Changes in this rate can influence other interest rates: consumer loans,mortgages,international exchange rate, etc. Therefore, we watch them closely.