Who Sets Interest Rates in Canada?

In Canada, the Bank of Canada is the main body that sets the key interest rate for the country.

This is called the policy interest rate (or overnight rate), and it influences almost every other rate you see—from mortgages to savings accounts.

Where KOHO Everything Fits In

While you can’t control the Bank of Canada’s decisions, you can choose an account that treats your money well when rates move.

That’s where KOHO Everything comes in:

• Grow your savings with 3.5% interest, one of the highest rates in Canada

• Earn a 2% cash back rate on groceries, eating, drinking, and transportation and 0.5% cash back on everything else

• There are no foreign exchange fees, so you save on international purchases and travel

• Unlimited transactions and free e-transfers

• No minimum balance required, ever

The Bank of Canada’s Role

The Bank of Canada:

• Sets the policy interest rate (the overnight rate target)

• Reviews this rate on a regular schedule throughout the year

• Adjusts it mainly to keep inflation in check and support a healthy, stable economy

When the Bank of Canada raises this rate, borrowing usually gets more expensive.

When it lowers the rate, borrowing usually gets cheaper, but savings rates can come down too.

How Banks and Lenders Set Their Rates

Once the Bank of Canada sets its policy rate, individual banks and lenders then decide:

• Their prime rate (a base rate they use for variable loans and lines of credit)

• The interest you pay on mortgages, lines of credit, and personal loans

• The interest you earn on savings accounts and other deposits

They look at:

• The Bank of Canada’s policy rate

• Their own funding costs

• Competition from other banks and fintechs

• Your personal risk profile (credit score, income, etc.)

That’s why two people can see different rates, even at the same time and in the same country.