Overnight Interest Rates

Overnight interest rates are the cost of borrowing money for one day between banks or financial institutions. They reflect the short-term monetary policy stance and influence overall economic activity. Central banks, like the Federal Reserve or the European Central Bank, set a target for these rates to help control inflation, stabilize the currency, and promote growth. When rates are low, borrowing becomes cheaper, encouraging spending and investment; when rates are high, borrowing costs rise, which can slow economic activity. These rates serve as a key benchmark for other interest rates in the economy.