[very simple question] Monetary policy & interest rate

CFA Level III
#1

[Edit: I think what I want to know is whether #1 is possible, since I already know that #2 is possible.]

When a central bank attempts to lower the interest rate, does it:

  1. do so directly by setting the rate (i.e. like a seller would set a price for buyers?), or

  2. use tools such as reserve requirement variation or OMO to affect the rate indirectly?

I know this question sounds very simple and almost dumb to ask, but even after a full our of seraching for an answer online, I couldn’t come to a confident conclusion.

Thank you all in advance.

#2

it does both…

OMO is one policy tool, setting target overnight rate (fed funds rate) or setting the required reserve limits are other tools they use.

#3

Thank you very much!

#4

It uses tool to directly influence the rate

Setting a rate lets the market know what to expect, sometimes by just saying they want xyz target the market will front run the actual policy action (first point) thus acheiving their rate objective.