Central bank rate changes reach borrowers quickly and savers slowly. The lag is not administrative delay; it follows from how deposits function within a bank's funding.
What a policy rate actually sets
A policy rate governs the cost of very short-term funds between banks and the central bank. It is a wholesale price, not a retail one.
Retail deposit rates are set by each institution as a commercial decision. Nothing obliges a bank to pass a change through in full or at all.
The link is competitive rather than mechanical. Deposit rates follow policy rates because banks compete for funds, not because they are required to move together.
Why deposits are cheap funding
Retail deposits are among the cheapest and most stable sources of funding a bank has. Balances are sticky, and a large share earns very little.
A bank with ample deposits has little reason to raise rates, because it does not need to attract more money. Raising rates would increase the cost of balances it already holds.
That last point drives most of the behaviour. A rate increase applies to every existing balance in the product, so the cost of attracting new money includes repricing old money.
Why cuts pass through faster
When policy rates fall, reducing deposit rates lowers funding costs immediately across the entire balance. The saving is realised at once.
There is little competitive pressure in the other direction, because savers are slower to move money out than to move it in.
The asymmetry is consistent enough to be a standing feature of retail banking rather than a characteristic of any particular institution.
How inertia sustains the gap
Most deposits sit in accounts opened years earlier. Moving them requires an action, and the immediate benefit of that action often looks small.
Banks are aware of this and price accordingly, which is why headline rates on new accounts routinely exceed the rates paid on long-standing ones.
The gap between a bank's best advertised rate and its legacy rates is the clearest measure of how much inertia is worth to it.
Where the lag is shortest
Institutions without large legacy deposit bases move fastest, because raising rates costs them little on existing balances and buys growth.
Products with fixed terms reprice only at maturity, so a rate set during one policy environment persists into the next.
Anyone comparing accounts is effectively measuring how each institution weighs the cost of repricing existing money against the value of attracting new money.