Even loans with a longer duration could in principle be financed by short-term borrowing on the interbank market. The lending rate in the interbank market will thus comprise the bank's financing cost for this loan and is therefore an important factor when the bank decides the lending rate it will offer the company. For loans with a longer fixed term, expectations of the development of the repo rate during the duration of the loan will affect the financing cost and thus the lending rate the bank sets for a longer term loan. A bank that has a surplus to invest can in the same way choose between investing it in the interbank market and lending money. The interbank rate will thus influence the lending rate the bank offers households and companies as it comprises an alternative yield. In addition to the interbank rate, however, the banks' lending rates are determined by many other factors. When setting interest rates, the banks must of course compensate themselves for the credit risks connected with the loan and at the same time reserve funds in their own capital to meet any future losses. The fact that banks from time to time make differing assessments of borrowers' credit rating should not in itself affect how much the banks' lending rate changes when the repo rate is raised. The impact from monetary policy should not, therefore, change merely as a result of the banks changing their assessments of the credit risk.
It is intuitively easy to understand that the amount of money in the economy is a decisive factor for the price of the goods produced in the country. In modern economies, where payments are largely made electronically, the monopoly on issuing banknotes is no longer an equally evident condition for enabling monetary policy to determine price trends. Today, it is instead the right to determine the terms in the systems for large electronic payments between banks and the opportunity to influence how much the banks shall borrow or deposit in the Riksbank that enable us to steer interest rates. For electronic payments to be able to function as money, it is necessary for the central bank to be perceived as guarantor for these means of payment in the same ways as with banknotes. This role can only be fulfilled by a central bank and in this way one can say that the possibility to determine price trends in the economy still lies with the monopoly on issuing money. The Riksbank governs the shortest interest rate in the interbank market, so that it normally remains close to the monetary policy-steered repo rate. The fact that the Riksbank can steer the interbank rate is primarily due to the fact that each individual bank participating in the system handling large interbank payments - known as the RIX system - always has an opportunity to borrow and deposit money in the Riksbank overnight at the lending and deposit rates set by the Riksbank.