Bank of Canada leaves Overnight Rate as it is

Oct 9th 2010 at 17.00GMT the Bank of Canada released the Overnight Rate data, which stayed the same at 1.0%.


Previous value 1.0%. Forecast 1.0%.


Overnight Rate is generally the rate that large banks use to borrow and lend from one another on the overnight market. In some countries (Canada, for example), the overnight rate may be the rate targeted by the central bank to influence monetary policy (Wikipedia).
In Canada it is the main interest rate. If it is raised it declines the interest in consumer lending, which in its turn stimulates savings and slows down the pace of economic growth. However the growth of the interest rate attracts foreign investors, which supports the Canadian Dollar (CAD) in mid-term perspective. However it depends on whether the growth of the interest rate is
based on the high pace of economic growth. If not, another scenario is possible, including economic stagnation and negative impact on the currency market in long-term perspective.

The perspective of another round of purchasing bonds by the Fed Reserve in the US is likely to be able to make the Bank of Canada (BoC) stop increasing the key interest rate (Overnight Rate). Yesterday the BoC released its final decision on one-day rate after raising it by 25pts 3 times in a row from a record low at 0.25% up to 1%. Analysts believe that in 2011 the rate will remain the same (1%).
Short-term interest rates are the key factor at the currency market. Generally speaking, traders analyze the data of other indicators only to predict the future change in the rates.
The Overnight Rate in Canada is published by the Bank of Canada 8 times a year. The next release is on Dec 7th 2010.



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