-  The Federal Reserve on 17 August 2007 enhanced the attractiveness of the central bank’s standing loan facility by cutting the spread between the interest rate on its lending facility (the discount rate) and the federal funds rate target to 50 basis points (from 100 basis points), and by increasing the allowable term on loans from overnight to 30 days.
However, the use of households’ inflation expectations may give rise to an upward-bias problem – an issue that is often pointed out by other central banks. In Japan, households always tend to expect that prices will rise even during a phase of deflation (Chart 5).