When the Bank of Canada wants to lower the real interest rate in Canada, it announces a ________
Overnight rate target (and the entire ± 0.25 percentage point operating band around the overnight rate target shifts ______). In response, the commercial banks ________ the market interest rates, particularly, the short term rates, by a similar amount.

Question

Quizplus · Accepted Answer

C) When the Bank of Canada wants to lower the real interest rates, it announces a lower overnight rate target. This action typically leads to a downward shift in the operating band around the overnight rate target. In response, commercial banks adjust their market interest rates accordingly, generally lowering them, especially the short-term rates, to align with the central bank's policy direction.

When the Bank of Canada Wants to Lower the Real