Bank of Canada policy rate: how it affects prime rates
The Bank sets the target for overnight borrowing between financial institutions. Its changes influence commercial bank prime rates and other borrowing and saving rates.
- Policy rate
- The Bank of Canada’s target for the overnight rate.Bank of Canada, policy rate
- Source snapshot
- 2.25% in the Bank’s September 2, 2026 announcement row; checked October 4, 2026. This is not a lender offer.Bank of Canada, key interest rate
An overnight target set by the Bank
Financial institutions settle payments between themselves every business day. An institution that needs funds can borrow from another for a day in the overnight market. The Bank of Canada sets the target for the interest rate on those loans; this target is its policy interest rate. Bank of Canada, overnight market (opens in a new tab).
The Bank’s published key-interest-rate table records a target of 2.25% for the September 2, 2026 announcement. This is a dated source snapshot, not a guarantee of a future rate or a borrowing rate available to a household. Bank of Canada, key interest rate (opens in a new tab).
How prime rates follow the policy signal
A change in the overnight target affects other interest rates in the economy, including commercial banks’ prime rates used for mortgages and lines of credit, and rates paid on deposits and savings. The policy rate is a starting point for those rates, rather than the rate of every loan or savings product. Bank of Canada, effects on other rates (opens in a new tab).