Temporary measures to reinforce the target for the overnight rate

On 9 March 2006, the Bank of Canada announced temporary measures to reinforce its target for the overnight rate. Specifically, the Bank announced that it would reduce the target for settlement balances to zero and, on a temporary basis, no longer commit to neutralizing all of the Sale and Repurchase Agreements (SRAs) conducted. These measures were taken in response to the rate on overnight general collateral (overnight loans that are secured by government securities) consistently trading below the Bank's target for the overnight rate.

Beginning in early February 2007, the rate on overnight general collateral again began to consistently trade below the Bank's target for the overnight rate. The temporary measures introduced on 9 March 2006 remain in place, and will continue to be used to reinforce the Bank's objectives for the overnight interest rate. Towards that end, the SRA operations held on 13 February and 14 February were not fully neutralized, with the result that the system was left in a deficit position on both days. In addition, to further reinforce the target for the overnight rate, the Bank is prepared to enter into SRAs outside of the regular 11:45 a.m. intervention time, including earlier in the morning.

The Bank will use the rate on overnight general collateral as its guide to conditions in the overnight market.

The temporary measures announced 9 March 2006 are available at https://www.bankofcanada.ca/en/notices_fmd/2006/not090306.html. For further background information on the implementation of monetary policy in the LVTS environment, please visit https://www.bankofcanada.ca/en/review/1998/r984d-ea.html. Information on LVTS settlement balances and on the daily target rate intervention is available at https://www.bankofcanada.ca/fmd/bankrate.html.