The overnight interest rate is crucial to the Bank of Canada when it implements its monetary policy because

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The overnight interest rate is a short-term interest rate that reflects the cost of borrowing funds overnight between banks. Changes in this rate by the Bank of Canada, which is the central bank of Canada, directly impact the cost of borrowing for commercial banks, which in turn influences the broader financial market and economy. This change in overnight interest rates tends to lead to changes in longer-term interest rates, which can affect the amount of borrowing and investment in the economy. Therefore, the Bank of Canada closely monitors and uses changes in the overnight interest rate as a tool to implement its monetary policy.

The Overnight Interest Rate Is Crucial to the Bank of Canada