Question

The European system of central​ banks' primary tool for conducting monetary policy is open market operations. It uses this tool to set the interest rate for very​ short-term interbank​ loans, which is known as​ the:________.
A. target financing rate
B. discount rate
C. overnight cash rate
D. marginal lending rate

Answer 1

Answer:

C) overnight cash rate

Explanation:

Both the Fed and the European Central Bank use interbank overnight cash rates as their operational target for monetary policy. It basically refers to the interest rate that is charged for overnight unsecured loans between domestic banks, i.e. when banks need some extra cash to cover some immediate issue, they obtain overnight funds that must be returned the next day.

Answer 2

Answer:

The correct answer is C. Overnight cash rate

Explanation:

The one-day rate is the interest rate at which a depository institution (usually banks) lends or borrows funds with another depository institution in the night market. In many countries, the one-day rate is the interest rate established by the central bank to guide monetary policy. In most cases, the one-day rate is the lowest interest rate available and, as such, is only available to the most solvent institutions.