Central Bank Interest Rates
Central bank interest rates are crucial tools used by central banks to influence a country's economic activity. By adjusting these rates, central banks can control inflation, manage economic growth, and stabilize the currency. When interest rates are increased, borrowing becomes more expensive, which can slow down spending and reduce inflationary pressures. Conversely, lowering interest rates makes borrowing cheaper, encourages spending and investment, and can help stimulate economic growth during periods of recession.
Impact on the Economy
These rates directly impact various aspects of the economy, including consumer loans, mortgage rates, and savings yields. Central banks, such as the Federal Reserve in the United States or the European Central Bank in the Eurozone, use interest rate adjustments as part of their monetary policy to achieve economic stability and growth. Decisions on interest rates are closely watched by financial markets and can have significant effects on global economic conditions.