Call Money

Call money is money loaned by banks on a short-term basis, usually to other banks. It is termed “call money” because payment can normally be demanded very quickly.

The interest rate that banks charge on call money is considered to be a good indicator of the general level of liquidity in the market. When the call money rate is low, that means that it’s fairly easy to get cash; when it is high, money isn’t circulating very freely. During a panic on Wall Street in 1907, the call money rate went from 6% to 100% in the course of a single day, demonstrating the sudden lack of confidence so frequent in early stock market panics.