The key lending rate of a central bank. This rate is determined and re-evaluated by a dedicated committee (known as a monetary policy committee, usually as part of a central bank). The committee meets on a regular basis to signal the monetary policy stance, represented by the key policy rate.
The monetary policy rate is the main operational tool of a country’s monetary policy. In practice, it is set to determine the level of the daily interbank lending rate (the lending rate in the interbank market), and is implemented through open market operations (OMOs).
By this rate, a central bank aims to achieve several objectives, mainly including influencing money supply and setting a trajectory that achieves the inflation target over a set period of time.
This rate is also referred to as policy rate.
