The interbank rate is the rate of interest that banks charge each other for short-term loans, typically overnight or for very short durations, in order to manage liquidity or meet reserve requirements.
These rates are central to the banking system’s operations—because banks borrow from one another, the interbank rate indirectly influences the interest rates available to consumers (loans, mortgages, deposits) plus markups.
Also, in foreign exchange markets, “interbank rates” refer to the rates large banks use when trading currencies with each other, forming the basis for global currency pricing.
