BIS central bankers’ speeches  1  Chart 1: The new LAF framework is based on explicit interest rate targeting  The new operating framework illustrated in Chart 1 with the modified LAF assigns a greater weight to the interest rate channel of monetary transmission.
This means that once the Reserve Bank changes policy repo rate, it should quickly impact the overnight interest rate which is the operational rate and then transmit through the term structure of interest rates as well as bank lending rates. Increasing importance of this channel was also evident from the mix of instruments of policy actions.