How central bank increases the target rate
Let's say that the central bank increases the target rate. When the target rate increases, the central bank needs to raise the overnight interest rate which may be accomplished by selling government securities. The central bank will then debit the commercial banks' central bank accounts and the banks will debit the accounts of the buyers of the securities. The reserves will now be too small, and this will create an upward pressure on the overnight interest rate. To create a long-term balance, banks will want to increase their deposits and reduce their lending. They can achieve this by raising bank interest rates.