Policy Rates
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      Policy Rates

      Benchmark interest rates (also known as the reference rate) is the minimum interest rate required by investors when investing in non-Treasury securities. It represents the cost of borrowing.

      Plainly speaking, it is the interest charged by the lender to the borrower. Any contract involving borrowers and lenders, such as all car loans, home loans, consumer loans, credit card interest, and mortgages, is influenced by benchmark interest rates. Some major benchmark interest rates are Hong Kong Prime Rate, London Interbank Offered Rate (Libor), and Fed Funds Rate. From a macro perspective, it can be understood as one of the tools used by central banks to interfere with the demand and supply for reserves, which can directly impact liquidity.

      A high benchmark interest rate will boost demand for reserves; a low benchmark interest rate will cause banks to increase money supply, catalyzing lending activities in the market and driving borrowing costs lower.

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