Interest rate corridor
In the money market , the interest rate corridor is an interest rate range formed by the interest rate for the overnight loan ( marginal lending facility ) of the central bank as the upper limit and the interest rate for the deposit facility of the central bank as the lower limit.
These two interest rates limit the development of interest rates on the money market:
- Upper limit : If the interest rate on the money market were to rise above the upper limit of the corridor, every bank would get the money cheaper from the central bank than to borrow it on the market (e.g. from other banks).
- There can be no lower money market rates either, since the banks would otherwise refinance themselves with their central bank .
See also
Web links
- Deutsche Bundesbank (The statistics section shows interest rates for the deposit facility and the peak facility)