How are interest rates set?

[John_James]

@jimaustri123

This ‘discount rate’, as mentioned, is a direct setting of rates in the market. What interests me here is under what circumstances does it suit central bankers to raise interest rates? I’ve heard many commentators e.g. Peter Schiff, saying - in response to their critics - things seem okay now but just wait for interest rates to go up… then you are going to see real problems. Which of the three ways mentioned by Wheylous(reserve ratios, discount rates and open market operations) are being referred to by these commentators? And what would be the driver for the central bank to change tack?

I discuss this here.

from Interest rate threads

in The Ultimate Beginner meta-thread

To further illustrate at least part of what Neodoxy is saying, see here:

What Causes Inflation? - DAF