Term: ACCOMMODATION

The extension of credit by the Reserve Bank to commercial banks. The central bank acts as a banker to the commercial banks, lending them money as they need it through what is known as the “discount window”. The discount window used to be an actual window in the Reserve Bank at which clerks from the commercial banks would go to draw physical cash. This “accommodation” was given at a rate known as the “repo rate” – which is still set today by the Monetary Policy Committee (MPC) every two months. The Reserve Bank can increase and decrease the liquidity in the economy by raising and lowering the repo rate.

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