Study On The Rationality Of Interest Rate As The Intermediate Target Of Monetary Policy

The intermediate target plays an important role in the operation process of monetary policy. It has been a hot issue not only in China but also in the world. As the present intermediate target of monetary policy in China, money supply is facing more and more criticism. The main reasons include finance innovation, exchange rate policy, currency circulation speed etc. After analyzing the irrationality of money supply, this study lists some substitutes, including banking credit scale, nominal exchange rate, inflation rate, interest rate etc, of which interest rate is the most favorable one. Furthermore, this study explains the advantages of interest rate from different perspectives, such as the market economy perspective, the monetary policy target, the money as goods as well as money history. But applying interest rate as the intermediate target of monetary policy is not enough, some affiliated measures must be taken, such as interest rate marketablisation, exchange rate system reform, the transmitting system of monetary policy's perfecting etc.