Bank Interest rates - Banking in the World

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Bank Interest rates

Interest Rates

Central Bank Rates

Bank interest rate, also referred to as the discount rate in American English, is the rate of interest which a central bank charges on the loans and advances to a commercial bank.

Whenever a bank has a shortage of funds, they can typically borrow from the central bank based on the monetary policy of the country.

The borrowing is commonly done via repos, where the repo rate is the rate at which the central bank lends short-term money to the banks against securities. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases, borrowing from the central bank becomes more expensive. It is more applicable when there is a liquidity crunch in the market.

The reverse repo rate is the rate at which banks can park surplus funds with reserve bank, while the repo rate is the rate at which the banks borrow from the central bank. It is mostly done when there is surplus liquidity in the market.




Country

Central Bank

Current Rate

Next Meeting

Last changed

United States

Federal Reserve (FED)

0.00%-0.25%

Mar 19, 2014

Dec 16, 2008 (-75bp)

Europe

European Central Bank (ECB)

0.25%

Mar 06, 2014

Nov 07, 2013 (-25bp)

England

Bank of England (BOE)

0.50%

Mar 06, 2014

Mar 05, 2009 (-50bp)

Switzerland

Swiss National Bank (SNB)

0.00%

Mar 20, 2014

Aug 03, 2011 (-25bp)

Australia

Reserve Bank of Australia (RBA)

2.50%

Mar 04, 2014

Aug 06, 2013 (-25bp)

Canada

Bank of Canada (BOC)

1.00%

Mar 05, 2014

Sep 08, 2010 (25bp)

New Zealand

Reserve Bank of New Zealand (RBNZ)

2.50%

Mar 12, 2014

Mar 09, 2011 (-50bp)

Japan  

Bank of Japan (BOJ)

0.10%

Mar 11, 2014

Dec 19, 2008 (-20bp)


How the rate is determined and its impact on the economy

The interest rate that is charged by a country’s central or federal bank on loans and advances controls money supply in the economy and the banking sector. This is typically done on a quarterly basis to control inflation and to stabilize the country’s exchange rates. A fluctuation in bank rates triggers a ripple-effect as it impacts every sphere of a country’s economy. For instance, the prices in stock markets tend to react to interest rate changes. A change in bank rates affects customers as it influences prime interest rates for personal loans. It is the rate at which central bank provides to the commercial bank for the excess reserves being kept with the central bank.

Find Central Banks and Interest rate by Country


 
 
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