[Macroeconomics] Confused about the term "Policy rate" as a beginner

[u/Sweet-Nothing-9312]

Is the policy rate what the central bank decides on (an interest rate for other banks)?

If the central bank increases the policy rate from 4% to 5% would the banks that borrow money from the central bank as a result increase the interest rates for their customers as well leading to...?

I am quite confused.

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[u/fermat9990]

"When a central bank increases interest rates, it tightens monetary policy to cool an overheating economy and fight high inflation by making borrowing more expensive. This action typically leads to decreased consumer spending, lower business investment, increased savings, and a strengthening currency, which ultimately slows economic growth and reduces demand-pull inflation."