How are interest rates determined in Canada?

In Canada, interest rates are determined by the policy of the Bank of Canada, the demand for loans, the supply of available lending capital, interest rates in the United States, inflation rates and other economic factors. The Bank of Canada helps the Canadian government manage the economy by setting the bank rate and controlling the money supply.

What is a bank of Canada rate?

The rate is the Bank of Canada estimate at which investment dealers were able to arrange most of their overnight financing of money market inventory, excluding chartered bank day-to-day loans and purchase and resale agreements with the Bank of Canada. The rates shown are a seven-day average for the week ending with the last Wednesday of the month.

When did monetary policy start in Canada?

This policy (the use of interest rates to cut inflation) culminated in 1981 when the bank rate rose above 21 per cent and the prime lending rate was 22.75 per cent. Canadian rates might not have reached such levels had it not been for the rise in rates in the United States, where a similar monetarist policy was in effect ( see Monetary Policy ).

What is interest on a loan?

Interest is stated as a rate (a percentage of the principal amount borrowed) to be charged for either an agreed or indefinite period of time that the money is on loan. The interest rate can be either fixed or variable.