First, it lowered its policy rate from 0.1% to a range between zero and 0.1%.
Changes in the policy rate ripple out to all interest rates paid by borrowers.
Another negative factor for the U.S. dollar remains the interest rate differential outlook or the official monetary policy rate.
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The charge is usually a full percentage point higher than the policy rate.
Monetary-policy hawks can reassure themselves that the policy rate is not too low.
Moreover, the Fed has the power to anchor a policy rate and thus bias market expectations to its chosen level.
With a Reserve Bank of India policy rate of 6%, and lending rates around 8.5%, credit is extremely cheap.
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"Today's policy rate cut is likely to be the last for several months, " said Aninda Mitra, India economist at Capital Economics.
For its part the ECB seemed likely to lower its main policy rate below 1% for the first time, probably to 0.75%.
After cutting its policy rate on May 3, the central bank warned that it saw little room for further reductions as inflation was high.
By restricting its liquidity support, the ECB will be able to guide overnight interest rates towards 1% without having to alter its policy rate.
Mr. Sanyal said he expects the RBI to cut its policy rate by another quarter percentage point at its next monetary-policy meeting on June 17.
The Bank of Thailand has already warned that its 3.25% policy rate is too low, and most investors have priced in further rises by year-end.
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.
Moreover, Banxico is likely to keep its policy rate steady at 4.5 percent until sometime in the 2014, which is when the Fed may begin raising rates.
Until deflationary Japan sees consumer prices rise by between 0% and 2% a year (with an unofficial aim of 1%), the long-standing near-zero policy rate will remain.
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.
In the current money market conditions, where banks have to approach the central bank for borrowing, the overnight lending rate is in fact the key operational policy rate.
The European Central Bank raised its policy rate by a quarter point in early July in order to send just such a message of intent to price-setters and wage-negotiators.
In their view, reduction in the main policy rate will likely be dependent to some degree on how much consensus is achieved on the design of the new bond purchase program.
Barclays Capital said Wednesday that it expects just a 25 basis point reduction in the main policy rate, known as the refinance, or refi rate, from the European Central Bank.
The instrument is implemented in the UK and US, where the central banks consider that there are risks of deflation and where the policy rate is constrained by the zero lower bound.
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The official monetary policy rate, or federal funds rate remains at zero to 0.25 basis points and the Federal Open Market Committee has suggested rates will remain at that level through mid-2013.
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"I think there are actions (that need) to be taken by the monetary authority in conjunction with any announcement or change in the policy rate, " he said on television channel CNBC TV18.
The refinancing rate that the ECB cut today has been at 0.75% since last July: Higher than the Federal Reserve's main policy rate, and the Bank of Japan's, and the Bank of England's.
Many argue that the European Central Bank's decision on April 7th to raise the policy rate in the euro area, and the prospect of further rises to come, has reinvigorated the carry trade.
In late January, the Reserve Bank of India reduced its policy rate by a quarter of a percentage point, the first cut since April 2012, but tempered expectations of further reductions due to high inflation and a wide current account deficit.
The morning papers say that Mr. Trichet, President of the ECB, is poised to raise the policy rate later this week for the second time in the present cycle, but the European economy has slowed since his first tightening move, making the timing more awkward.
The news comes ahead of an all-important ECB meeting in which consensus estimates are that the institution headed by Jean Claude Trichet will hike its main policy rate by 25 basis points, according to Nomura. (Read Portuguese Parliament Rejects Austerity Plan, PM Socrates Resigns).
But this is merely to say that they have no coherent exchange-rate policy: monetary policy and exchange-rate policy (aside from occasional meddling) are operationally indivisible.
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