The Bank of Canada controls the overnight rate by ________.
A) varying the settlement balances it provides to the banking system
B) dictating terms of the LVTS
C) managing government savings
D) borrowing from the provincial government

Question

Quizplus · Accepted Answer

The Bank of Canada controls the overnight rate by varying the settlement balances it provides to the banking system. This is done through open market operations, where the bank buys or sells government securities in exchange for settlement balances. By increasing or decreasing the amount of settlement balances available to banks, the Bank of Canada can influence the overnight lending rate that banks charge each other for short-term loans. The other options provided do not relate to the Bank of Canada's control over the overnight rate.

The Bank of Canada Controls the Overnight Rate by ________