OK, let us skip Loanable funds model, less reading.
Consider the nominal equilibriating currency banker operating within a bound market making risk. That currency banker will set the interest charges whenever its market making risk closes in on the bounds. It never sets a 'rate', an interest rate is set elsewhere. But the currency banker indirectly sets the rates vie currency insurances sold by others. That is the best model.
Traders at the nominal currency bank trade liquidity, their S/L ratio is what they look at, compared to the last market clearing by the currency banker.
In the case of central banking, Congress sets the interest rates, it is a bit different, but cycles. Our central banker almost always follows the one year, and that is set by the willingness of Congress to raise or lower taxes and spending.
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