It's not done manually
And that's the whole thing about fiat currencies and why they are so interesting. They are unique in their capacity to automatically readjust the money supply as required by the economy via creating as well as destroying what has become known as endogenous money. And while we are at it, you can't match this supply manually anyway as it is simply impossible technically. The central bank changes interest rates, that's true indeed, but it is only to oversee and maintain this self-regulating mechanism
But it is. Endogenous money is not created automatically; it is created by banks at their sole discretion. It is not destroyed that way either; it happens only when the loan is repaid, which depends on the will of the borrower. Banks are known to blow bubbles and borrowers are known to become insolvent.
Without a regulating authority, a fractional reserve system is unsustainable. Banks will inevitably blow a bubble, which will burst, result in a bank run and a total collapse. This actually happened systematically in 19th-20th centuries and led to the emergence of CBs. Could we survive the 2008 crisis without the Fed’s QE program? Unlikely.
Conventional methods of the monetary policy (controlling the interest rate) as well as unconventional (“printing” new base money) are crucial to the modern finance system and are an actual reason why it is so flexible and sustainable. That is a huge advantage over any blockchain design, for we cannot allow manual control at that scale.