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The interbank overnight lending market is a market where depository institutions buy or sell funds needed to meet a reserve requirement at the end of the trading day. In this market, banks can sell their excess reserves to other banks with insufficient reserves at the overnight inter-bank lending rate.

The central bank typically serves as the institutional basis of the overnight lending market. Should demand for funds exceed/fall short of expectations -- reflected also in a sharp movement in the market determined overnight lending rate -- the central bank may increase/decrease liquidity in the system. Periodically, the central bank may reduce/raise the target overnight lending rate in order to signal a change in monetary policy.

Source Publication:
The OECD Economic Outlook: Sources and Methods.


Statistical Theme: Financial statistics

Created on Tuesday, September 25, 2001

Last updated on Friday, March 28, 2014