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Chapter 30

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Economics 1022A/B
Desmond Mc Keon

Chapter 30 The operating band is the target overnight rate plus or minus .25 percentage points so the operating band is .5 percentage points wide 1. The bank rate is the interest rate that the Bank charges big banks on loans, and is set at the target overnight rate plus .25 percentage points 2. Settlement balances rate is the interest rate the Bank pays on reserves and is set at the target overnight rate minus .25 percentage points  An open market operation is the purchase or sale of government securities by the BOC from or to a chartered bank or the public (Bank buys securities, it pats for them with newly created reserves and when sells they are paid for with the reserves help by banks) o Purchase increases bank reserves, sale decreases bank reserves Quick Overview:  When the BOC lowers the overnight rate: o 1. Other short-term interest rates and the exchange rate fall
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