As Dagon noted, it doesn’t, in general, only in some specific cases. It doesn’t control the interest rate on its own debt, even in countries like the US where the government controls the currency in which its debt is denominated.
I’m not an economist, but I think central banks would do better to focus on something like NGDP level targeting rather than trying to use interest rates to control specific metrics of inflation. That’s a narrower question, but maybe closer to the one you’re trying to ask?
There are also laws against lending at extremely high interest rates, or other aspects of loan terms, or discussions of the effective interest rates charged by payday lenders, which are less about monetary policy principles and more about the innumeracy of most people and society not addressing that innumeracy, or the desperation of its more vulnerable members, in useful and practical ways. It’s banning a product perceived as dangerous by those with the banning power instead of finding other ways to get people not to buy the product.
I think there are also much deeper questions tied into any discussion of interest rates, some of them very old. What is a debt? When is it just to incur a debt or impose a repayment obligation on someone or refuse to pay a debt? When is it immoral or coercive to make a loan, and what steps are permissible to ensure repayment?
Set interest rates in what sense?
As Dagon noted, it doesn’t, in general, only in some specific cases. It doesn’t control the interest rate on its own debt, even in countries like the US where the government controls the currency in which its debt is denominated.
I’m not an economist, but I think central banks would do better to focus on something like NGDP level targeting rather than trying to use interest rates to control specific metrics of inflation. That’s a narrower question, but maybe closer to the one you’re trying to ask?
There are also laws against lending at extremely high interest rates, or other aspects of loan terms, or discussions of the effective interest rates charged by payday lenders, which are less about monetary policy principles and more about the innumeracy of most people and society not addressing that innumeracy, or the desperation of its more vulnerable members, in useful and practical ways. It’s banning a product perceived as dangerous by those with the banning power instead of finding other ways to get people not to buy the product.
I think there are also much deeper questions tied into any discussion of interest rates, some of them very old. What is a debt? When is it just to incur a debt or impose a repayment obligation on someone or refuse to pay a debt? When is it immoral or coercive to make a loan, and what steps are permissible to ensure repayment?