Bank of Canada operating band
Widening the acceptable band for the overnight rate would reduce the effectiveness of monetary policy to a certain extent. If the actual market rate is near the middle of the band, then it would be possible for the policy rate band to be moved by 50 basis points, and the actual rate could remain unchanged. This implies a potential need for greater movements in the policy rate band to achieve the same overnight rate trajectory.

Furthermore, allowing more variation in the overnight rate creates greater uncertainty about the average over time, even with the policy stance unchanged. This creates greater risk for fixed income instruments of maturities greater than overnight. Under the assumption that investors are risk averse, this would raise term premia.