Figure14-12The Bank of Canada Target Rate and the Overnight Rate, January 3 to December 31, 2012 The Bank of Canada uses open-market operations to make sure that the overnight rate stays close to it target rate. It manages to hit its target extremely accurately. Between January 3 and December 31, 2012, the actual overnight rate differed from its target by one hundredth of a percentage point or less about 98% of the time. It never differed by more than two hundredths of a percentage point. These reasons explain why, since the late 1980s, the Bank of Canada’s policy has been to set a key interest rate rather than set the money supply. An interest rate target has several advantages over a money supply target: it is more easily achieved, and it is more easily explained to and understood by the public. Source: Bank of Canada.