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Repo Rate (Great Britain)

Definition: The Repo Rate is the short-term interest rate at which the Bank of England lends to banks and other financial institutions (usually on an overnight basis). Repo is short for "repurchase agreement", a contract whereby the seller is obliged to repurchase a security from the buyer at a set price on a specific date in the future.

Description: The Repo Rate is the most important interest rate in Great Britain. The Bank of England has set 2% as the upper limit for inflation in Great Britain. If prices rise at an annual rate of more than 2%, the Bank of England is likely to intervene by increasing interest rates.

Influence: High interest rates lead to a decrease in lending and trigger an increase in consumer savings, causing a slowdown in economic growth. A rise in the Repo Rate usually leads to an increase in capital flowing into the UK and provides a boost for the pound in the medium term. However, if the increase in rates is not accompanied by rapid economic growth, this may lead to economic stagnation and have a negative impact on the pound in the long run.

Market Impact: High

Released: Monthly, usually on the first Thursday of the month at 11:00 GMT (BoE minutes are released 2 weeks after the rates are announced, usually on a Wednesday)

Source: The Bank of England

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