Asset price channel
When the central bank decides to decrease the policy rate, adjustments in short-term money market rates occur. People then reallocate their savings towards non-interest bearing assets such as real estate and equity. A rise in demand for these assets results in higher prices. As a result, wealth increases and higher consumption follows. Moreover, higher equity prices also increase market value of firms, thus making it more worthwhile to invest. Ultimately, an expansion in domestic demand would lead to higher economic growth.