This is quote from Gregory Mankiw's macroeconomics text about mechanism of formation of the interest rate in the money market model:
How does the interest rate get to this equilibrium of money supply and money demand? The adjustment occurs because whenever the money market is not in equilibrium, people try to adjust their portfolios of assets and, in the process, alter the interest rate. For instance, if the interest rate is above the equi- librium level, the quantity of real money balances supplied exceeds the quantity demanded. Individuals holding the excess supply of money try to convert some of their non-interest-bearing money into interest-bearing bank deposits or bonds. Banks and bond issuers, who prefer to pay lower interest rates, respond to this excess supply of money by lowering the interest rates they offer. Conversely, if the interest rate is below the equilibrium level, so that the quantity of money demanded exceeds the quantity supplied, individuals try to obtain money by sell- ing bonds or making bank withdrawals.To attract now-scarcer funds, banks and bond issuers respond by increasing the interest rates they offer. Eventually, the interest rate reaches the equilibrium level, at which people are content with their portfolios of monetary and nonmonetary assets.
I also noticed that the money supply curve is strictly vertical.
Both of these things make me suspect that this model assumes that the central bank doesn't target the interest rate. Am I right? Or is it somehow possible for the central bank to target the interest rate in this model without breaking the interest-rate forming mechanism outlined above?