[4] Changes in the policy rates directly affect only very short-term money-market interest rates. But the expectations of future policy rates are a primary determinant of medium and long-term interest rates, together with term premia.
It is the adjustment in term interest rates along the risk-free and sovereign curve that matters most for the economy, as these directly affect the conditions under which firms, banks and governments can borrow in financial markets and indirectly affect the cost of borrowing of firms and households to the extent that they rely on bank borrowing, since banks price their loans off the risk-free or sovereign yield curve.