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Home Dictionary S Sterling Overnight Interbank Average Rate (SONIA) The Sterling Overnight Index Average, or SONIA, is an index of very short-term unsecured loans between UK financial institutions. Launched in 1997, several changes made in 2017 and 2018 resulted in the SONIA rate becoming the preferred risk-free reference rate for UK securities dealers. This is due to the fact that the LIBOR rate and its calculation methodology have been criticized for fixing and fraud. Reference Rate
September 25, 2022 The phrase “reference rate” refers to the base rate against which other interest rates are pegged. Blended Rate
September 25, 2022 The compound rate is the interest rate charged on a loan, which is a combination of the previous rate and the new rate. Dove
September 25, 2022 Pigeons are believed to be more interested in stimulating job growth through low interest rates than in controlling inflation. Euro Interbank Offer Rate (Euribor)
September 25, 2022 Euribor is the interbank overnight rate, which consists of the average interest rates of a number of major European banks, which are used to lend to each other in euros. Expectations Theory
September 25, 2022 Expectancy theory predicts future short-term interest rates based on current long-term interest rates. Federal Discount Rate
September 25, 2022 The federal discount rate is the interest rate that the Federal Reserve System (FRS) charges banks for borrowing money from the Federal Reserve Bank. Fisher Effect
September 25, 2022 The Fisher Effect is an economic theory created by economist Irving Fisher that describes the relationship between inflation and real and nominal interest rates. Gresham's Law
September 25, 2022 Gresham’s Law states that a legally overvalued currency will force a legally undervalued currency out of circulation. Guaranteed Investment (Interest) Certificate (GIC)
September 25, 2022 A Guaranteed Investment Certificate (GIC) is an investment sold by Canadian financial institutions. Hawk
September 25, 2022 Hawks are politicians and advisers who advocate higher interest rates to keep inflation in check. Interbank Rate
September 25, 2022 The Interbank Rate, also known as the Federal Funds Rate, is the interest charged on short-term loans made between financial institutions. Interest Rate Derivative
September 25, 2022 An interest rate derivative is a financial contract whose value is based on some underlying interest rate or interest-bearing asset. Interest Rate Parity
September 25, 2022 Interest rate parity is the fundamental equation that governs the relationship between interest rates and exchange rates. Interest Rate Sensitivity
September 25, 2022 Interest rate sensitivity measures how much the price of a fixed income asset changes when the interest rate changes. Key Rate
September 25, 2022 The key rate determines the lending rates for banks, as well as the cost of a loan for borrowers. Legal Rate of Interest
September 25, 2022 The legal interest rate is the highest interest rate that can be legally charged on any type of debt. Liquidity Trap
September 25, 2022 A liquidity trap is when monetary policy becomes ineffective due to very low interest rates combined with consumers choosing to save rather than invest in higher yielding bonds or other investments. London Interbank Bid Rate (LIBID)
September 25, 2022 LIBID - London Interbank Offered Rate, the “offer” rate at which banks are willing to borrow deposits in Eurocurrency. Low Interest Rate Environment
September 25, 2022 A low interest rate environment occurs when the risk-free rate is set below the historical average. M3
September 25, 2022 M3 is the total money supply, which includes M2 money as well as large time deposits, institutional money market funds, short-term repurchase agreements and larger liquid funds. Market Segmentation Theory
September 25, 2022 Market segmentation theory states that long-term and short-term interest rates are not related to each other because they have different investors. Monetarist
September 25, 2022 Monetarists are economists and politicians who adhere to the theory of monetarism. Monetary Base
September 25, 2022 Also known as M0, the monetary base of an economy includes all paper and coin money in circulation, as well as bank reserves held by the central bank. Negative Interest Rate
September 25, 2022 Negative interest rates are a form of monetary policy in which interest rates fall below 0%. Negative Interest Rate Environment
September 25, 2022 A negative interest rate situation exists when overnight loan rates fall below zero percent.