Question

The interest rate banks charge each other for overnight lending.

Answer 1

The interest rate that banks charge each other for overnight lending is commonly referred to as the "federal funds rate" in the United States. This rate is critical because it influences other interest rates, including those for loans and mortgages, and is a key tool used by the Federal Reserve (the central bank of the U.S.) to implement monetary policy. In other countries, similar rates exist, such as the European Central Bank's "minimum bid rate" or the Bank of England's "bank rate."