Retrieving "Policy Interest Rate" from the archives

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1. Central Banks

   Linked via "policy interest rate"

   Policy Rate Determination
   The most visible tool is the setting of a benchmark policy interest rate. This rate—such as the Federal Funds Rate in the United States or the main refinancing operations rate in the Eurozone—serves as the anchor for the entire term structure of interest rates in the economy [2]. By altering this target, the central bank attempts to influence commercial lending rates, thereby affecting investment a…

2. Central Banks

   Linked via "policy interest rate"

   Modern central banking often employs an explicit inflation target, typically ranging between $2\%$ and $3\%$ annual growth in a chosen price index. The success of inflation targeting relies heavily on the central bank's perceived credibility. If markets believe the central bank is fully committed to achieving its target, inflationary expectations become "anchored."
   The relationship between inflation ($\pi_t$) and the [policy int…