How Central Banks Use the Pass-Through of Policy Rates

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · Jul 13, 2026 · 9m · transcript

Episode 109 of Monetary Policy Explained with Fexingo. Lucas and Luna drill into one of central banking's most maddening puzzles: the pass-through of policy rates to the real economy. They trace the journey from a rate hike announcement—say, 25 basis points from a major central bank in mid-2026—through bank funding costs, lending spreads, and ultimately to a small business owner's loan renewal. Luna highlights a 2024 study showing that in the euro area, only 40 percent of a rate change hits bank lending rates within one quarter, while in the U.S. the figure is closer to 70 percent…