What happens after Governing Council sets the policy interest rate: Inside the implementation framework that makes monetary policy work

Kaetlynd McRae

No 2026-45, Staff Analytical Papers from Bank of Canada

Abstract: What happens after Governing Council sets the target for the policy interest rate? Setting the target rate is the most visible part of monetary policy, but it is only the first step in transmitting the rate decision to the Canadian economy. This paper explains how the Bank of Canada uses its monetary policy implementation framework (MPI) to ensure that the rate decision is reflected in financial markets by keeping short-term interest rates close to the target policy rate.

Keywords: Financial markets and funds management; Funds management; Monetary policy; Monetary policy framework and transmission; Monetary policy tools and implementation; Money and payments; Payment and financial market infrastructures (search for similar items in EconPapers)
JEL-codes: E E4 E41 E42 E5 E51 E52 E58 (search for similar items in EconPapers)
Date: 2026-09
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocsap:26-45

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