The theory and practice of interest rate smoothing

Ágnes Csermely () and András Rezessy
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Ágnes Csermely: Magyar Nemzeti Bank (central bank of Hungary)

MNB Bulletin (discontinued), 2007, vol. 2, issue 2, 6-15

Abstract: The interest rate policy of the Magyar Nemzeti Bank typically consists of taking several smaller steps in one direction. Other central banks follow similar practices. Their interest rate policy actions are characterised by gradual changes: in other words, they avoid sudden, major changes in interest rates and are wary of reversing interest rate cycles too frequently. This study will present the theoretical background of the practice of such interest rate smoothing, the motivations of central banks as revealed by their communication, and some important considerations for Hungarian monetary policy.

Keywords: interest rate smoothing; base rate; monetary policy. (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
Date: 2007
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