I understand that in many countries the base interest rates is set by a central bank. They do this by changing the amount they charge for overnight loans to the large banks to cover transfers. But when interest rates go up where does the additional money go?
Update: Obviously interest payments go to the lender. But the lender is paying higher rates to the central bank. What does the central bank do with them?
Interest payments go to whoever is making the loan.
Your interest payments go to your lender, the bank.
When the bank borrows money from the federal reserve, the interest goes to the federal reserve.
If the federal reserve makes an actual profit after operating costs, I believe that money goes back into the general budget, just as tax money does. In fact, the federal bank does publish income and expense data, eg https://www.federalreserve.gov/newsevents/pressreleases/other20220114a.htm, which points out that "the Reserve Banks had estimated net income of $107.8 billion during 2021, of which $107.4 billion was remitted to the U.S. Treasury as required under the Federal Reserve Act."
So their profits, if any (and there aren't always) go to the Treasury. If you want to know what the Treasury does with money, you can get their statements too.
General-fund money goes where your representatives send it. Or at least it does if they don't then insist on withholding payments they already approved and trying to have it both ways.
Update: Obviously interest payments go to the lender. But the lender is paying higher rates to the central bank. What does the central bank do with them?
When a new auto loan is setup, the lender will charge a higher rate. They do this because not only do they have additional interest due to the federal reserve if they have to do any borrowing, but they also have to pay higher rates to their depositors. Their depositors expect this. In fact if they don't pay high enough rates some depositors will leave.
The central bank periodically transfers their profits to the general budget.
