Thanks buddy!
Do you happen to know what kind of money LIBOR refers to though- central bank reserves or normal money?
Do you happen to know what kind of money LIBOR refers to though- central bank reserves or normal money?
First, I missed typed - I meant to spell it LIBOR in the title.
Second, LIBOR is just the acronym for the rate used for Panel Banks to lend money to each other. Central Bank Reserves and "normal money" are all the same Pounds, no? The rate at which banks charge each other for loans must be lower than the rate they use when loaning to customers, otherwise they wouldn't be able to make much money (you can't make a profit if you don't sell your goods for more than they cost you.) The reason for the heavy focus and talk about LIBOR is that it drives all other interest rates in the UK. If LIBOR goes up, consumer rates will go up accordingly. The American equivalent is the Fed Funds Rate. Note that in the US the Central (or Federal) Reserve lending only happens as a last resort, this may be the same in the UK since banking systems are pretty similar.