Interest rates

Here are the interest rates of the world’s leading central banks. Trader has to follow the dynamics of different countries’ discount rate levels as they have an impact on both comparative prices of financial assets and exchange rate.

Managing the discount rate is regarded as one of the most important instruments of monetary policy. The diminishing of the rate makes commercial banks’ borrowing cheaper and increases money supply. It’s used in order to stimulate the economy. On the other hand, lifting up the discount rate is aimed to fight inflation.

Definitions:

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1. United States

The Fed Funds Rate is the interest rate at which private depository institutions (mostly banks) lend balances (federal funds) at the Federal Reserve to other depository institutions, usually overnight. It is the interest rate banks charge each other for loans. Changing the target rate is one way the Chairman of the Federal Reserve can influence the supply of money in the U.S. economy. The Federal funds target rate is determined by a meeting of the members of the Federal Open Market Committee which normally occurs eight times a year about seven weeks apart.

The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility - the discount window. The Federal Reserve Banks offer three discount window programs to depository institutions: primary credit, secondary credit, and seasonal credit, each with its own interest rate. All discount window loans are fully secured.

2. European Union

Refinancing Tender Rate is the possibly least interest rate for funds attracting claims in ECB tender. Every two weeks the tender is held for funds investment, which is necessary for liquidity support in money system. Refinancing tender rate is the main European interest rate. The ECB set the higher inflationary edge at 2. If the consumer prices grow above 2 per year, interest rates increase may be expected.

The rate on the deposit facility, which banks may use to make overnight deposits with the Eurosystem.

The rate on the marginal lending facility, which offers overnight credit to banks from the Eurosystem.

3. Great Britain

The official bank rate (also called the Bank of England base rate or BOEBR) is the interest rate that the Bank of England charges Banks for secured overnight lending. It is the British Government's key interest rate for enacting monetary policy.It is most analogous to the US discount window than to the Federal funds rate. The security for the lending can be any of a list of eligible securities (commonly Gilts) and are transacted as overnight repurchase agreements. The official bank rate has existing in various forms since 1694 and has ranged from 0.5% to 17%. The name of this key interest rate has changed over the years.

The current name "Official Bank Rate" was introduced in 2006 and replaced the previous title "Repo Rate" (repo is short for repurchase agreement) in 1997. Previously (between 1981 and 1997) the title was "Minimum Band 1 Dealing Rate" and prior to that the "Minimum Lending Rate".

The bank of Japan influences the level of the given rate by means of operations with the state securities.

4. Switzerland

LIBOR rates are set for different periods and on different instruments. LIBOR is fixed at 11:00 each day, London time, and is an average of the last ten quotations offered by sellers.