The sterling money markets
in The UK financial system (fifth edition)
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The sterling money market located in London is a wholesale market for short-term funds and consequently provides facilities for economic units to adjust their cash position quickly. This chapter discusses the nature of the London money markets. It reviews the assets traded in the money markets and their valuation, and examines the supply of central bank money. The chapter also reviews the Bank of England's (BofE) and Debt Management Office's (DMO) operation in the money markets. The BofE is the price setter in the money market, as the Monetary Policy Committee (MPC) sets the bank rate, but, on the other hand the DMO is a price taker. The primary object of BofE's intervention is to ensure that short-term interest rates are consistent with the bank rate set by the MPC. This objective also includes the objective that day-to-day and intra-day volatility be limited.

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