Minutes from the latest meeting of the Federal Open Market Committee, the central-bank panel that sets interest-rate policy, indicate a rate-cut idea has been around for a while.
When the bank took over interest-rate policy from the Treasury in 1997, it gave up its role as manager of public debt as well as its job supervising banks.
However, for the previous three months, three members of the Bank's rate-setting Monetary Policy Committee have voted to increase rates.
One explanation for all the confusion is that it reflects a deeper uncertainty about why the Bank adopted its zero interest-rate policy in the first place.
The Item Club says that the change should be used by the Treasury to "review the remit" that it gives the Bank's interest rate-setting Monetary Policy Committee.
It was shoved back into recession partly by its own policies: an ill-timed tax increase in 1997 and the (temporary) ending of the Bank of Japan's zero-interest-rate policy in 2000.
The bank's rate-setting council knew it was tightening policy during a sticky period for the economy.
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The central bank's monetary policy targets the federal-funds rate, which banks charge each other on overnight loans.
On March 19, the central bank lowered its main policy rate by a quarter percentage point--the second cut in 2013--but warned it had limited room for more reductions.
The Conservatives would create a Financial Regulation Division within the Bank of England and a Financial Policy Committee similar to the rate-setting Monetary Policy Committee, which would monitor systemic risks and have the power to break up banks.
The minutes of the latest meeting of the bank's monetary-policy committee suggest that it will raise its benchmark interest rate in March or April, for the first time since September 2008.
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In its third-quarter credit policy review, the Reserve Bank of India left the bank rate at 6% and the key lending rate, which was cut as recently as Jan. 2, at 5.5%.
In late January, the Reserve Bank of India cut its policy lending rate by a quarter of a percentage point--the first rate cut since April and the second in about four years--but said it had limited room to ease rates further given India's high inflation and wide current-account deficit.
"Even as the policy stance emphasizes addressing the growth risks, the headroom for further monetary easing remains quite limited, " the Reserve Bank of India said in its mid-quarter monetary policy review after lowering its key lending rate, known as the repurchase rate, to 7.5% from 7.75%.
"Even as the policy stance emphasizes addressing the growth risks, the headroom for further monetary easing remains quite limited, " the Reserve Bank of India said in its mid-quarter monetary policy review after lowering its key lending rate, known as the repurchase rate, to 7.50% from 7.75%.
The most potent criticism is that aiming for exchange-rate stability compromises the central bank in its task of controlling inflation one instrument (monetary policy) is being asked to do two things.
The central bank is supposed to be independent, and is also supposed to be in charge of exchange-rate and monetary policy.
Since it moved to unlimited fixed-rate funding, the central bank has been content to allow the overnight rate to drift much lower than the policy rate.
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