The implementation of monetary policy in Canad

The Bank of Canada’s framework can be broadly characterized as one with zero reserves and which has a target for the overnight interest rate at the midpoint of a 50-basis-point operating band.1 There are close links between the framework for the implementation of monetary policy and the payments system, because ultimately the final positions of system participants settle on the books of the Bank o [...] The money market The roots of the money market in Canada stem from the 1950s, when the Bank of Canada took a number of steps to foster the development of such markets to improve the implementation and transmission of monetary policy, and to support the Bank’s role as fiscal agent for the Government of Canada. [...] The mandate of the CPA is to establish and operate national systems for the clearing and settlement of payments and other arrangements to make or exchange payments; facilitate the interaction of its clearing and settlement systems with other systems involved in the exchange, clearing, or settlement of payments; and facilitate the development of new payment methods and technologies. [...] This interest rate is called the Bank Rate.12 • The interest rate paid by the Bank of Canada on positive balances after settlement of the LVTS is set at the lower limit of the operating band. [...] The Bank has the option of not fully neutralizing SRA operations and may thus leave the system in a deficit position at the end of the day, requiring one or more participants in the LVTS to take an advance at the Bank Rate under the Bank’s SLF.