Policy interest rate

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Central banks - monetary policy - interest rates.

"The policy interest rate is an interest rate that... the central bank sets in order to influence the evolution of the main monetary variables in the economy...

The policy interest rate determines the levels of the rest of the interest rates in the economy, since it is the price at which private agents - mostly private [commercial] banks - obtain money from the central bank.

These [commercial] banks will then offer financial products to their clients at an interest rate that is normally based on the policy rate."


Source: Focus Economics webpage. June 2020


Examples include the US Fed funds rate, the European Central Bank's interest rate on its main refinancing operations, and the UK's Official Bank Rate.


See also