"Central bankers do not determine interest rates. The market does"
Quite correct, except for one important thing, the fact that the markets do that on the basis of their expectations about future movements in the interest rates policy settings by central bankers.
And have you ever understood how, for example. the Reserve Bank of Australia sets the cash rate?
It sets a band for the market to operate in by simply saying:
1) I am willing to lend you at X% , and 2) I am willing to borrow from you at X%-Y%.
Between those two limits, it is completely up to the market to determine the rate because if the market is charging more than X% then the borrower goes to borrow from the RBA, and if the market is paying less than X%-Y% then the lender lends to the RBA.
