There are actually several routes by which this impact is felt. One route involves influencing investment activity by altering its profitability. As I have stated, the effects of changes in the policy interest rate are passed onto interest rates in various financial markets as well as deposit and loan rates.
From the standpoint of firms and households, funding rates change in line with a change in the policy interest rate, and this will affect their decisions to invest in equipment and housing. Another possible route operates via changes in foreign exchange rates affecting either the profitability or the volume of exports.