One of the sections of a financial market where securities and financial instruments with short-term maturities are traded is called the money market. (Forssbaeck & Oxelheim, 2002). The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time. In short it is the market for short-term securities (Edirisuriya, 2012. p. 445). However in this case, money market interest rates are considered as a key determinant of the demand and supply of the liquid funds. An interest rate, as defined by (Heakal, 2013), is the cost of borrowing money. Or, on the other side of the coin, it is the compensation for the service and risk of lending money. This rate is one of the most important financial indicators of an economy and changes in interest rates can greatly hamper the economy. These interest rates are determined by the central banks of economies. .
The central bank of Australia known as the Reserve Bank of Australia (RBA) determines the interest rate in Australia, a continent and a country in the Southern Hemisphere, lying to the south of Southeast Asia. The Reserve Bank of Australia (RBA) sets the official interest rate, dependent upon how the economy is performing at the time and does so by regulating the volumes of money that banks have in their exchange settlement accounts. It is considered mandatory for all banks to have these exchange settlement accounts in order to proceed in performing the daily net settlements between banks. Interest rate fluctuations can sometimes occur and these are done so for the benefit of the economy so ensure the economy is run smoothly.
The State Bank Of Pakistan reports the interest Rate in the Pakistan, which is the central bank of the Pakistan. In Pakistan, a country located in South Asia, The State Bank Of Pakistan sets an interest rate at which it lends to financial institutions.