What is the impact of interest rates on the economy?

What is the impact of interest rates on the economy?

Interest rates significantly influence economic activity. When rates are low, borrowing is cheaper, encouraging spending and investment.

How do high interest rates affect consumers?

High interest rates can lead to increased borrowing costs for consumers, which may reduce spending on big-ticket items like homes and cars.

What happens to inflation when interest rates rise?

Typically, rising interest rates can help control inflation by reducing spending and slowing down economic growth.

Can you explain how interest rates affect the stock market?

Higher interest rates can lead to lower stock prices as borrowing costs increase for companies and consumers, reducing profits.

What are the long-term effects of sustained low interest rates?

Sustained low interest rates can lead to asset bubbles, increased debt levels, and potential challenges in monetary policy.