Introduction to Floating Rates

Introduction to Floating Rates

Peter explains what floating rates are and explains why the most important floating rates are in fact central bank policy rates
Overview

Floating rates are interest rates that move up or down over time based on interest-rate benchmarks agreed between market counterparties or banks and their customers. Central banks use floating policy rates to conduct monetary policy and determine the flow of money into the economy.

Key learning objectives:

  • How are floating rates used?

  • Why are floating rates useful?

  • Why are floating policy rates important to central banks?

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