Investopedia

Continue to Site »

Bank Rate

Filed Under » , ,
Dictionary Says

Definition of 'Bank Rate'

The interest rate at which a nation's central bank lends money to domestic banks. Often these loans are very short in duration. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. Lower bank rates can help to expand the economy, when unemployment is high, by lowering the cost of funds for borrowers. Conversely, higher bank rates help to reign in the economy, when inflation is higher than desired.

The bank rate can also refer to the interest rate which banks charge customers on loans.

Investopedia Says

Investopedia explains 'Bank Rate'

In the U.S., the bank rate is often referred to as the federal funds rate. The bank rate is set indirectly by the Federal Open Market Committee (FOMC) which buys or sells treasury securities to regulate the money supply. These actions serve to push the effective federal funds rate closer to the targeted rate. Regulation of the economy through management of the money supply is referred to as monetary policy.

Articles Of Interest

  1.

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.

  2. The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.

  3. Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.

  4. Predict Inflation With The Producer Price Index

    Find out how the PPI can be used to gauge the overall health of the economy.

  5. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.

  6. Lessons Learned From the Banking Crisis

    There are lessons to be learned on how to handle severe financial downturns, and while the Fed is learning, politicians may not be.

  7. Austerity: When The Government Tightens Its Belt

    When a government tightens its belt in tough economic times the entire nation feels the squeeze.

  8. Will Quantitative Easing Be Japan's Savior?

    The quantitative easing program, recently announced by the new governor of the Bank of Japan, Haruhiko Kuroda, is for a cash infusion of $1.4 trillion by the end of 2014. Will it help the Japanese ...

  9. Inspecting A Country's Debt

    Tensions over just how to handle debt are pitting the rich world against the developing world like never before.

  10. Breaking Down The Fed Model

    Learn what pundits mean when they say that stocks are undervalued according to the Fed model.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center