Why is the refinancing rate higher than the rediscount rate

The refinancing interest rate is the interest rate discount for commercial banks to lend to the central bank, while the current interest rate refers to the bill holder’s interest rate when the bill is not matured. In order to obtain cash, a certain amount of interest is paid to the bank to transfer the bill. When liquidity is strong, the natural interest rate is high, so the refinancing interest rate is higher than the discount interest rate.

What are rediscount interest rates and reloan interest rates

Rediscount interest rates: Commercial banks or specialized banks rediscount to the central bank the unexpired qualified commercial bills that have been discounted with customers. The interest rate paid when discounting. Rediscounting is a special form of loans provided by the central bank to commercial banks. It is also an important means for the central bank to control the scale of credit and the money supply. In countries where macroeconomic control is mainly indirect control, the central bank controls rediscount and thus the money supply by controlling the rediscount rate.

Re-lending rate: The re-lending rate is the interest rate at which commercial banks lend to the central bank. The re-lending rate is one of the central bank's monetary tools. Increasing the refinancing rate is a sign of central bank tightening, which will reduce the country's credit scale and cause the stock market to fall, which will have the opposite effect.

Extended information:

As soon as it appeared, the rediscount rate has been used as one of the three major means by which the central bank implements monetary policy, and it has received great attention. In the 1920s, in the early days of the central bank's credit adjustment business, the rediscount rate was regarded as the most effective policy. However, since the initiative of whether to carry out rediscount rests with commercial banks, the role of the rediscount rate is not based on the central bank's policy. The bank's will can be exerted at any time, which keeps the central bank in a passive position. Therefore, countries attach different importance to the application of rediscount rate policy.

What does refinancing interest rate mean

Loans refer to loans issued by the central bank to financial institutions to achieve monetary policy objectives. Refinancing has two meanings in China. Re-lending in the narrow sense refers to the general term for central bank loans to financial institutions; re-lending in the broad sense refers to the concept of re-lending, including bill rediscounting. However, rediscounting, as one of the three traditional tools of monetary policy, should be excluded from the scope of re-lending. Loan is a highly planned quantitative monetary policy tool that is administrative and passive. However, it needs to be pointed out that, drawing on the financial development experience of developed countries, it is impossible for any single, independent monetary policy tool to complete all macro-control. Instead, appropriate tools must be selected for coordination based on monetary policy objectives in different periods.

What is refinancing interest rate

Hello, refinancing refers to the loans granted by the central bank to financial institutions to achieve monetary policy goals. Re-lending in China has two meanings. Re-lending in the narrow sense refers to the general term for central bank loans to financial institutions; re-lending in the broad sense refers to the concept of refinancing, including bill rediscounting.

The refinancing interest rate you mentioned may be the bill rediscount rate.