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22 Cards in this Set
- Front
- Back
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Monetary Policy Objective
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A central bank goal regarding a macroeconomic indicator that the bank influences.
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Inflation-Control Target
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Refers either to the range of annual inflation rates within which the central bank aims to keep actual inflation or to the midpoint of the target range. |
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Total CPI
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Synonym for the CPI or Consumer Price Index; the adjective "total" emphasizes that is a broad measure of the price level. It is subject to larger swings than the core CPI inflation rate.
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Total CPI Inflation
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Rate of change of the total CPI.
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Core CPI Inflation |
Rate of change of the core CPI.
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Monetary Policy Instrument
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A tool or technique that a central bank uses to achieve a monetary policy objective. The key instrument employed is the changing of interest rates as circumstances occur.
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Modern Central Bank Theory |
The view that the central bank changes its key policy (that is, official interest rate) directly and commercial banks respond by changing market interest rates.
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Official Interest Rate
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A general term for the interest rate which the central bank controls to achieve its monetary policy objective; a term for the key policy rate of a central bank.
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Prime Business Rate
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The interest rate that commercial banks charge to their least risky business borrowers; also called the prime rate.
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Benchmark Rate |
An interest rate upon which other interest rates are based.
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Overnight Rate Target
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The interest rate that the Bank of Canada wants to prevail in the financial market where major Canadian institutions borrow and lend funds to settle daily transactions with one another. |
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Overnight Rate
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The market interest rate that financial institutions charge each other for overnight loans.
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Large Value Transfer System (LVTS)
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An electronic wire system overseen by the Bank of Canada that allows major financial institutions operating in Canada to send large payments back and forth to each other.
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Settlement Balances
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Accounts held at the Bank of Canada by financial institutions for the purpose of settling their net payment obligations to one another. |
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Operating Band
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A term used by the Bank of Canada to describe the range of possible overnight interest rates: from 0.25 percentage points below the overnight rate target to 0.25 percentage points above the target.
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Deposit Rate
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The interest rate that the Bank of Canada pays commercial banks for overnight deposits; it corresponds to the lower limit of the Bank of Canada's operating band for the overnight rate.
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Bank Rate
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The interest rate that the Bank of Canada charges commercial banks for overnight loans; it corresponds to the upper limit of the Bank of Canada's operating band for the overnight rate; for decades, it was the Bank's official interest rate.
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Basis Point
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One hundredth of a percentage point; term often used in describing interest rates.
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Effective Lower Bound
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The lowest practically feasible level for a central bank's key policy rate.
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Real Interest Rate Formula
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r = i - pi
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True or False: Inflation appears to change relatively slowly in response to changes in policy or economic conditions.
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True. |
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Interest Rate Spread
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The difference, often measured in basis points, between a benchmark interest rate and a related market interest rate (such as between an overnight rate and a mortgage lending rate).
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