[clarkrinker]

I was wondering why they don't move the interest rate up continuously over a period instead of flat jumps. Is the shock of jumping up in one day useful economically? That would be slightly confusing, because it seems like I'm always reading that the market has already priced in changes to the interest rate by the time the announcement comes out.

[nonameiguess]

They actually do. The announcement is them saying what they target the rise to be. It may be slightly more or slightly less and it's not instantaneous. Direct lending to banks is an instrument available, but most of their influence comes from open market operations, which only indirectly impacts prevailing interest rates and consists of more or less continuous buying and selling of existing debt, which doesn't all happen on the day of the announcement.

[maxfurman]

They still need to price contracts between jumps. If they move it "continuously," then the rate at any given moment is difficult to determine. Hopefully no one is using javascript to calculate it!

[jpgvm]

It's a coarse enough instrument that changing it only a few times a year still spreads the effect out over the whole year and even if it was continuous announcing a change in the rate of change will have exactly the same effect.