The history of interest rates is really the history of inflation. When inflation is high, interest rates are high, and when inflation is low, interest rates are low.
Interest rates are used to achieve overall economic stability.
Monetary policy transmission encompasses the whole continuum of interest rates; of course, the central bank only determines the overnight policy rate.
Everyone may have some advise for the RBI. Some may advise, 'Cut your lending rates and raise the deposit rate.' How will a bank function? We take a medium term view. The bank has an 80-year-old history. I don't want to destroy it for a few decisions.
Under a cold turkey strategy, at each policy meeting the Federal Open Market Committee would make its best guess about where it ultimately wants the funds rate to be and would move to that rate in a single step.
Therefore, let me reiterate that the rate should not meet the interests of a specific group or one or two groups, it should meet the fundamental development interests of the economy itself.
If you believe in free markets, why do we have to have the Federal Reserve set interest rates?
