What is the relationship between inflation and interest rates?

What is the relationship between inflation and interest rates?

Inflation and interest rates are closely linked. When inflation rises, central banks often increase interest rates to control it.

How does increasing interest rates affect the economy?

Higher interest rates can slow down economic growth as borrowing becomes more expensive, which can reduce spending and investment.

What happens to savings when interest rates go up?

When interest rates rise, savings accounts typically offer higher returns, encouraging people to save more.

Can you explain how inflation is measured?

Inflation is commonly measured using the Consumer Price Index (CPI), which tracks the price changes of a basket of goods and services.

What are the current trends in inflation and interest rates?

Current trends show that many countries are experiencing rising inflation, leading central banks to consider increasing interest rates.