If a policy interest rate is continuously set too high or too low relative to economic and price conditions, this will have an adverse impact on the economy and prices, which will eventually require a significant rise or reduction in the policy interest rate by the central bank.
If market anticipation of such unnecessary fluctuations in interest rates increases uncertainty, the risk premium will become larger, thereby causing medium- and long-term interest rates to shift further upward. It is sometimes said that long-term interest rates reflect people's view of future economic and price conditions, and they cannot therefore be controlled by monetary policy.