The Canadian Overnight Rate in the Last 20 Years

Published on January 15, 2024 by Naureen Durack

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Canada has several tools to regulate its domestic market, and national monetary policy is one of them. Within it, the overnight rate is a key element the Bank of Canada uses to promote economic growth and control inflation.

Understanding what this overnight rate represents is crucial. Furthermore, this rate has significantly fluctuated over the past two decades. Therefore, exploring the factors that determine these rate fluctuations is essential. Finally, what is the impact of the overnight rate on the economy and household finances? This article answers all these questions and traces the evolution of the Canadian overnight rate since 2003.

Understanding the Overnight Rate in Canada

Some professionals may refer to the overnight financing rate target, while others may mention the overnight rate. The terms may vary, but the underlying reality remains the same. All these expressions simply refer to the interest rate at which the government lends money to commercial banks through the Bank of Canada. The overnight rate is the primary tool the government uses to control inflation.

When the economy grows too rapidly, there is a risk of increasing inflation. To slow down this trend, the overnight rate is raised. This leads businesses and individuals to pay higher interest on their loans. The effect of such a measure is to discourage borrowing and reduce spending to curb inflation. When interest rates are raised, individuals tend to spend less and save more, which results in a slowdown of the economy.

Conversely, if the government observes that the economy is struggling or regressing, it can remedy the situation by lowering the overnight rate. This action will lower other interest rates within the economy. The result of this interest rate reduction is that individuals will spend more, take out more loans, and stimulate the economy.

The Bank of Canada, the central bank of Canada and a government-owned entity established in 1934 determines the overnight rate. It uses the overnight financing rate target or overnight rate to keep inflation around the target value of 2%.

Evolution of the Rate Over the Last 20 Years

Dates	Change	Overnight Rate
Wednesday, December 6, 2023	—	5
Wednesday, October 25, 2023	–	5
Wednesday, September 6, 2023	–	5
Thursday, July 13, 2023	+0,25	5
Thursday, June 8, 2023	+0,25	4,75
Thursday, January 26, 2023	+0,25	4,5
Thursday, December 8, 2022	+0,5	4,25
Thursday, October 27, 2022	+0,5	3,75
Thursday, September 8, 2022	+0,75	3,25
Thursday, July 14, 2022	+1	2,5
Thursday, June 2, 2022	+0,5	1,5
Thursday, April 14, 2022	+0,5	1
Thursday, March 3, 2022	+0,25	0,5
Friday, March 27, 2020	-0,5	0,25
Monday, March 16, 2020	-0,5	0,75
Wednesday, March 4, 2020	-0,5	1,25
Wednesday, October 24, 2018	+0,25	1,75
Wednesday, July 11, 2018	+0,25	1,5
Wednesday, January 17, 2018	+0,25	1,25
Wednesday, September 6, 2017	+0,25	1
Wednesday, July 12, 2017	+0,25	0,75
Wednesday, July 15, 2015	-0,25	0,5
Wednesday, January 21, 2015	-0,25	0,75
Wednesday, September 8, 2010	+0,25	1
Tuesday, July 20, 2010	+0,25	0,75
Tuesday, June 1, 2010	+0,25	0,5
Tuesday, April 21, 2009	-0,25	0,25
Tuesday, March 3, 2009	-0,5	0,5
Tuesday, January 20, 2009	-0,5	1
Tuesday, December 9, 2008	-0,75	1,5
Tuesday, October 21, 2008	-0,25	2,25
Wednesday, October 8, 2008	-0,5	2,5
Tuesday, April 22, 2008	-0,5	3
Tuesday, March 4, 2008	-0,5	3,5
Tuesday, January 22, 2008	-0,25	4
Tuesday, December 4, 2007	-0,25	4,25
Tuesday, July 10, 2007	+0,25	4,5
Wednesday, May 24, 2006	+0,25	4,25
Tuesday, April 25, 2006	+0,25	4
Tuesday, March 7, 2006	+0,25	3,75
Tuesday, January 24, 2006	+0,25	3,5
Tuesday, December 6, 2005	+0,25	3,25
Tuesday, October 18, 2005	+0,25	3
Wednesday, September 7, 2005	+0,25	2,75
Tuesday, October 19, 2004	+0,25	2,5
Wednesday, September 8, 2004	+0,25	2,25
Tuesday, April 13, 2004	-0,25	2
Tuesday, March 2, 2004	-0,25	2,25
Tuesday, January 20, 2004	-0,25	2,5
Wednesday, September 3, 2003	-0,25	2,75
Tuesday, July 15, 2003	-0,25	3
Tuesday, April 15, 2003	+0,25	3,25
Tuesday, March 4, 2003	+0,25	3

 

What is the current overnight rate in Canada?

As of October 27, 2023, the overnight rate of the Bank of Canada is 5%. It may have changed by the time you read this article.

What is the difference between the overnight rate and the interest rate?

The Bank of Canada determines the overnight rate in its dealings with commercial banks. Individuals and businesses do not have access to this market. Interest rates are set on loans provided by banks and other financial institutions. They must consider the prevailing overnight rate, among other factors, to avoid losing money.

When will the next overnight rate be set?

The next overnight rate of the Canadian central bank will be set on January 24, 2024, at the first Bank of Canada meeting for 2024. It will be implemented starting on January 25. It is worth noting that the Bank of Canada meets eight times each year: on January 24, March 8, April 12, June 7, July 12, September 6, October 25, and December 6. You can follow the schedule of these events on the Bank of Canada's website.

Conclusion

The overnight rate is a powerful tool for regulating the economy and maintaining Canadians' purchasing power. It helps contain inflation or stimulate growth as needed in the Canadian economy.