How does the central bank influence interest rates?
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rockey
Apprentice
Joined: 12 Oct 2004
Posts: 22
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 Posted: 06/21/08 - 09:58 Post subject: |
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| Hi everyone. I heard that the central bank is responsible for defining and influencing the country's interest rates. That is all very well, but is that not something which is determined by the free market and its mostly uncontrollable movements? How, then, does the central bank influence interest rates? Please let me know! |
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euell
Apprentice
Joined: 14 Nov 2005
Posts: 7
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| Posted: 07/20/08 - 22:08 Post subject: |
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| It follows the way in which the market is behaving, and then sets interest rates as a result of this, and where they are planning for the economy to head. This is in fact one of the bank's most important tasks, which influences the whole functioning of the economy! It is therefore important to get it right. |
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