For central banks,short term interest rates are likely to be
A) long run policy targets
B) intermediate-term targets
C) operational instruments
D) taken as exogenously determined
E) irrelevant to policy making

Question

Quizplus · Accepted Answer

Short term interest rates are used by central banks as an operational instrument to implement monetary policy. They adjust short-term rates to control inflation, stabilize the economy, and maintain financial stability. While long-run policy targets may be guided by inflation targets or full employment goals, short-term interest rates are the tool used to achieve those targets. Intermediate-term targets may also be set, but they would be influenced by the expected path of short-term rates. Short-term interest rates are not exogenously determined and are highly relevant to policy-making.

For Central Banks,short Term Interest Rates Are Likely to Be