interest-rate policy

Quick Reference

A policy in which governments or central banks set interest rates is an attempt to influence the money supply. Higher rates of interest will reduce the demand for money, giving a downward impetus to output, employment and prices. Lower interest rates will have the opposite effect. Responsibility for interest-rate policy was restored to the Bank of England by the UK government in 1997. See monetary policy.

Subjects: Financial Institutions and Services.

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