You will recall from prior courses in economics and finance that the purpose of capital markets is to bring together investors who want to invest savings with companies or governments who need capital to expand or to finance budget deficits. The cost of funds at any time (the interest rate) is the price that equates the current supply and demand for capital. A change in the relative ease or tightness in the capital market is a short-run phenomenon caused by a temporary disequilibrium in the supply and demand of capital.
As an example, disequilibrium could be caused by an unexpected change in monetary policy (for example, a change in the growth rate of the money supply) or fiscal policy (for example, a change in the federal deficit). Such a change in monetary policy or fiscal policy will produce a change in the NRFR of interest, but the change should be short-lived because, in the longer run, the higher or lower interest rates will affect capital supply and demand. As an example, a decrease in the growth rate of the money supply (a tightening in monetary policy) will reduce the supply of capital and increase interest rates. In turn, this increase in interest rates (for example, the price of money) will cause an increase in savings and a decrease in the demand for capital by corporations or individuals. These changes in market conditions will bring rates back to the long-run equilibrium, which is based on the long-run growth rate of the economy.