July 19, 2013 / 7:54 PM / 6 years ago

Bank of Canada takes steps to reinforce benchmark rate

The Bank of Canada building is pictured in Ottawa March 3, 2009. REUTERS/Chris Wattie

OTTAWA (Reuters) - The Bank of Canada said on Friday it was raising the target for the minimum daily level of settlement balances in its transfer system to C$250 million ($241.02 million) from C$25 million to keep a key short-term interest rate from drifting higher.

The measure aims to prevent the overnight lending rate from surpassing the bank’s 1 percent target, it said in a notice on its website. Controlling the overnight lending rate is the central bank’s main policy tool.

“Various indicators of the overnight interest rate have recently been slightly, but persistently, above the Bank’s target for the overnight rate, indicating some ongoing frictions in the system,” it said.

Reporting by Louise Egan; Editing by Jeffrey Hodgson

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