Riksbank to rename the repo rate to policy rate. Will other central banks follow?

The world’s oldest central bank is revamping its monetary policy framework. One of the changes is renaming repo rate as policy rate.

The changes are proposed in a two step manner.

In a first step starting in October
• Ceasing to conduct daily market operations in the form of fine-tuning transactions
• Setting the deposit rate on the standing deposit facility at 0.10 percentage points below the policy rate
• Continuing to offer Riksbank Certificates with a one-week maturity at the policy rate, but limiting the volume of certificates to ensure the overnight rate is close to the policy rate.

In a second step within a maximum of two years
• Setting the lending rate on the standing lending facility at 0.10 percentage points above the policy rate
• Tightening the collateral requirements for the standing lending facility
• Maintaining the current collateral requirements for intraday credit
• Replacing the Riksbank’s “repo rate”, which is currently the interest rate at which Riksbank Certificates with a one-week maturity are issued and which the Executive Board of the Riksbank adopts, with the more appropriate term “The Riksbank’s policy rate”.

I think this is something all central banks should do. Repo rate is too wonky a term for people to understand. Policy interest rate is a much better term and communicates to people what central banks are trying to do…

 

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