Liquidity is as important to an economy as interest rates. While interest rates determine the cost of money, adequate liquidity ensures that money continues to flow smoothly through the financial system. For a Central Bank, managing liquidity is therefore critical to maintaining financial stability and ensuring effective transmission of monetary policy. However, interest rates do not move solely with liquidity conditions. Demand and supply in the bond market, expectations around economic growth and inflation, Government borrowing requirements, fiscal conditions and overall market sentiments also influence the direction of rates.