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Central banks raised interest rates a tiny amount from 0 to 0.05%. Banks were like: we no longer want to borrow all this cash we weren't doing anything with any
by BenoitEssiambre 5y ago
Central banks raised interest rates a tiny amount from 0 to 0.05%. Banks were like: we no longer want to borrow all this cash we weren't doing anything with anyways please take it back central bank.
- BenoitEssiambre 5y agoTo add to this, central banks don't lend out cash without banks pawning an asset in return. And they only do so on a limited time basis. The banks have to promise to repurchase the pawned asset at a certain date, hence the name "repo" (reverse repo from the central bank's perspective). Central banks are basically pawn shops that get to create their own cash to lend out.