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Relate overnight interest rates with interest rates

By controlling overnight interest rates, the central bank will affect the interest rates with longer maturity. The reason for this is that interest rates with similar maturity cannot be too different. If, for example, the central bank increases the target rate (move intercept on the yield curve upwards), then interest rates with short maturity will very likely increase but longer interest rates may also increase.

 

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9582429

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