The money market is central to the implementation of monetary policy

The money market is the market for instruments with a maturity of up to one year, with no coupon payments or other similar cash flows until maturity. The market fulfils a variety of functions for its participants. For instance, it enables the balancing of temporary liquidity imbalances between participants needing to place liquidity and those needing to borrow liquidity. The Riksbank indirectly sets the framework for this liquidity balancing by determining interest rates in its operational framework. This determines the monetary policy counterparties' opportunity costs for liquidity management. In this way, the Riksbank stabilises the shortest market rates close to the policy rate. The money market is thus the first stage in the transmission of monetary policy and is therefore of central importance to the Riksbank.

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