LONDON (Reuters) - The Bank of England said on Monday its standing deposit facility was used for first time since August 2007 on Friday as overnight interbank lending rates unusually fell below the rate offered by the central bank.
The Bank said 5 billion pounds was placed in its facility which remunerates at 100 basis points below Bank Rate, currently 4.0 percent.
Sterling overnight interbank lending rates fell below 4 percent on Friday following massive injections of liquidity from central banks. However, three-month interbank lending rates remain high, suggesting strains remain in the system.
"Use of the deposit facility suggests there is too much money at the very short end, even though term lending rates remain high," said Philip Shaw, chief economist at Investec.
"Everyone wants to lend overnight but no one is interested in lending further out."
(c) Reuters 2012. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
