Question
Norges Bank publishes its overnight lending rate ("D-loan rate") at a daily frequency in two tables, but they show different values. Why?
Answer
Norway's central bank overnight lending rate is published in two tables. We have recently switched our process to use the table with more history, but it differs at several periods from the prior table.
The series is:
- IR%CBONLUD.INOR = Interest rates: Central bank - Average overnight lending rate, (% p.a., NSA)
In a direct communication, the source explained the discrepancy. In short, the two tables show different nuances which are not explicitly documented in the title, column header, or otherwise. The prior table shows the highest rate being utilized within a four-step ("tranche-based") system, but the Excel file shows the average rate.
The source wrote:
There is a break in the Daily Data excel file. From 1st March 1986 a system for overnight CB [central bank] lending was introduced with only a single interest rate on D-loans [overnight loans]. This system replaced a tranche based lending system with a rising interest rate schedule, which had been in operation since 1965. At the time when this system was replaced in March 1986 the highest tranche interest rate was 13.0 percent, which is the value reported for 13.01.1986 in the html table. The volatility in the Daily Data Excel file in the early 1980s prior to the break on 1st March 1986 originates, however, from the bimonthly character of the old tranche based lending system. This explains the 1st March 1986 break in the Daily Data excel file.
On the web page it says 13.00 on 13.1.1986, the reason for this is because this day the interest rate on the 4th tranche increased from 12.50 to 13.00 per cent.
In the tranche based loan system, the loan period was 2 months. The period started January 1 and ended February 28. This means that once a bank has had to borrow within this period, it had to "go" up the stairs to a higher rate. As of January 13, the banking system was at an average interest rate of 11.70 percent. As you will see from the Excel file, it started January 2 with an interest rate of 8.1 per cent (ie at the very bottom of the stairs, as shown in the table above) and then the interest rate rose during the loan period.
Please be aware that
The Norges Bank key policy rate was the D-loan rate (Døgnlånsrente) from 1986 to 1993; it is now the sight deposit rate (Foliorente). Data Buffet carries both.
References
See also
Related Releases
Monetary Policy - Key Rate