To reduce short-term market interest rates,the Bank of Canada could

Question

Quizplus · Accepted Answer

The most effective way for the Bank of Canada to reduce short-term market interest rates is to reduce its target for the overnight rate. This is because the overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or "overnight") funds among themselves. Therefore, a lower overnight rate would reduce borrowing costs for banks and encourage them to lend more money. This, in turn, would increase the supply of money in the economy and put downward pressure on short-term interest rates. The other options listed may also have an impact on short-term interest rates, but they are less direct and less powerful than adjusting the overnight rate target.

To Reduce Short-Term Market Interest Rates,the Bank of Canada Could