Many things must be taken into consideration when approaching any aspect of economic policy. Policies and procedures cannot be effective, and can sometimes be very detrimental, without adequate knowledge of the economy in its individual parts and in its entirety. Interest rates are on the seemingly endless list of aspects of the economy that can be greatly affected by internal and external factors. When a central bank (such as the Federal Reserve in the U.S. or the Bank of England in the UK) decides to raise or lower short-term interest rates, they must rely on extensive research and analysis, open market operations, and economic expectation/speculation.
             According to the Bank of England (BoE), the ability to influence interest rates in the market depends more on the supply of liquidity than on the method in which the liquidity is supplied. The central bank wants to keep other banks short of liquidity so that the other banks must rely on the central bank for liquidity. In order to regulate liquidity, the BoE uses open market operations. In this way, they assist with the development of the private sector in "high credit quality securities," which in turn gives banks and other participants incentive to use these same markets to manage their own liquidity. Open market operations include repo operations, discounting, purchase and reselling of securities, and outright purchases of securities. All of these must be practiced and reported on a daily basis to ensure that regulation remains economically beneficial and legal. The central bank's "counterparties," such as discount housing agencies and other financial institutions, are used to assist with this regulation and to ensure that the other banks' liquidity remains short (BoE Quarterly Bulletin).
             So, how should this be done? In a speech delivered by Fed Governor Ben Bernanke on May 20, 2004, it was argued that a gradual
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