Bank of Canada
Quick Definition
Canada's central bank, responsible for monetary policy and setting the overnight rate.
Full Explanation
The Bank of Canada (BoC) is Canada's central bank, established in 1935. Its primary mandate is to keep inflation low, stable, and predictable — targeting a 2% inflation rate within a 1%–3% control range. The BoC's most influential tool is the overnight target rate, which it announces 8 times per year. Changes to this rate directly impact the prime rate used by commercial banks, affecting variable-rate mortgages, lines of credit, and savings rates across Canada. The BoC also manages the currency, oversees financial system stability, and issues bank notes.
Related Terms
Prime Rate
The base lending rate banks use, tied to the Bank of Canada overnight rate.
Overnight Rate
The interest rate at which major banks lend each other money overnight.
Variable Interest Rate
An interest rate that fluctuates based on the prime rate.
Inflation
The rate at which the general price level of goods and services rises over time.
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