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  • Keith&Jacqueline

How Does the Overnight Rate Affect the Prime Rate?

Updated: Dec 22, 2022

When the overnight rate is increased by the central bank, it becomes more expensive for banks to borrow money from one another, increasing their total cost.

To make up for this increase in costs, banks increase their prime rates, which makes borrowing money for customers more expensive. In essence, banks pass the increased cost onto the consumer.

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