What the policy rate is
The Bank of Canada's policy interest rate is its target for the overnight rate: the interest that major financial institutions charge one another to borrow money for a single day. The Bank does not lend at that rate to the public, or set what your bank charges you. It steers the overnight market towards the target, and every other Canadian dollar interest rate is priced from there. The Bank describes its aim as keeping inflation at the 2% midpoint of a 1% to 3% control range, judged over the next six to eight quarters rather than today.
The decision belongs to the Governing Council, which announces it on eight fixed dates a year, published in advance on the Bank's policy interest rate page. Two administered rates hold the market close to the target. Each announcement sets the Bank Rate, which the Bank charges on overnight loans to institutions, a quarter of a point above the target, and a deposit rate it pays on their balances at the target itself: the announcement of 12 July 2023 is a typical example. No institution lends overnight for less than the Bank pays or borrows for more than it charges.
How a change reaches your mortgage
How quickly you feel a decision depends on the kind of mortgage you have, and Canadian mortgages are renewed far more often than they are paid off. Most Canadian mortgage holders have a term of five years or less, far shorter than the time it takes to repay the loan, so most borrowers meet the rates of the day several times over the life of one mortgage.
- Variable-rate mortgages are usually written as the lender's prime rate plus or minus a margin, and the Financial Consumer Agency of Canada explains that prime is the rate lenders build their other rates from. Prime moves with the policy rate, and the Bank publishes the big banks' prime rate each week beside their posted mortgage rates. With adjustable payments, your payment changes when prime does. With fixed payments, the payment stays put and more of it goes to interest; if rates reach the trigger point written into your contract, the lender may raise your payment.
- Fixed-rate mortgages keep their rate for the whole term, so a decision reaches you only at renewal. Five-year fixed rates are priced mostly from what lenders pay to borrow for five years, which follows Government of Canada bond yields and what markets expect the Bank to do next, not today's decision alone. The five-year mortgage rate tracker shows the posted rate the big banks quote.
Whichever you hold, the stress test means you qualify at a rate above the one you pay; the five-year tracker explains how. To see what a different rate does to your payment, put it into the mortgage calculator, which compounds the rate half-yearly the way Canadian fixed-rate mortgages are quoted. For a car or personal loan, the loan calculator does the same job.
How it reaches your savings
High-interest savings accounts follow the policy rate, but your bank decides how far and how fast, and it is under no obligation to pass a rise on in full. Guaranteed investment certificates fix their rate for the term, so a GIC bought before a cut keeps paying the old rate until it matures, and many GICs cannot be cashed before then.
The savings goal calculator and the compound interest calculator take the rate your account pays, not the policy rate. Use the rate your bank quotes for the account; the policy rate is the benchmark it is priced against.
Reading the chart and the table
The chart draws the target as steps, because it stays where the Governing Council put it until the next change. The table lists every change since the Bank's business-daily series V39079 begins on 21 April 2009, newest first, with the size of each move. Announcements that held the rate are not rows, because nothing changed.
Each row is dated when the new target took effect. Until the end of 2020 that was the day of the announcement. From 2021 a change takes effect on the business day after it is announced, so a Wednesday decision appears here on the Thursday. The full series downloads as a CSV with the dates and values the Bank publishes.