Definition
The policy rate is the Bank of Canada's target for the overnight rate, used as its primary monetary policy tool. It is raised to slow inflation and lowered to stimulate the economy.
The Bank of Canada announces its decision eight times per year on a pre-published schedule. Announcements typically occur on Wednesday mornings and are accompanied by a detailed communiqué and, at certain meetings, a Monetary Policy Report.
A change in the policy rate transmits within hours to the prime rate at chartered banks, then to variable mortgage rates ("prime ± spread"). Fixed mortgage rates, by contrast, track the 5-year Government of Canada bond yield, which anticipates future Bank of Canada decisions.