The target interest rate at which major banks lend money to each other overnight.
The Bank of Canada sets the overnight rate at eight scheduled announcements per year. This rate directly influences the prime rate, which in turn affects variable mortgage rates and HELOCs. When the BoC raises the overnight rate, borrowing costs increase. When it lowers the rate, borrowing becomes cheaper. The BoC adjusts the rate to control inflation, targeting 2% annual inflation. The rate has ranged from 0.25% (pandemic lows) to 5.00% (2023 peak) in recent years.
Related terms: Prime Rate | Variable Rate Mortgage | Mortgage Stress Test