Money market liquidity
The purpose of Norges Bank's liquidity management policy is to ensure that the Executive Board’s interest rate decisions are reflected in short-term money market rates. Through its liquidity management policy, Norges Bank ensures that the banking system has a daily liquidity surplus which is deposited as sight deposits with Norges Bank. The sight deposit rate thus provides a floor for money market rates.
Norges Bank develops projections for the liquidity in the banking system. On the basis of these projections, Norges Bank offers banks liquidity, normally via fixed-rate loans (F-loans), thus ensuring excess liquidity in the banking system. Norges Bank may also withdraw liquidity to reduce the liquidity in the banking system via fixed-rate deposits (F-deposits). The interest rates on F-loans and F-deposits are usually determined through multi-price auctions*, and will normally be slightly higher than the sight deposit rate. Liquidity management will thus contribute to establishing short-term money market rates at a level slightly higher than the sight deposit rate.
*In a multi-price auction, also called American auction or ordinary auction, banks make bids for a specified amount and interest rate.
Overview of banking system liquidity in Norway 2007
The tables and charts below are updated every Monday and Thursday at noon. The projection for the year is updated at the end of every month