It is generally regarded as cumbersome to change them often or quickly and the use of open market operation to manage bank liquidity is more likely to stimulate market development;
Interbank liquidity dried up.
But because Banks are using central-bank liquidity to plug holes in their short-term funding, the money multiplier is collapsing: even as reserves swell, broad-money and credit growth is wilting.
A high level of bank liquidity, low interest rates, the improved employment situation and a rebound in asset prices all act to lift demand.
Lending between Banks remains stifled, and demand for central-bank liquidity is consequently extremely high.
