What is the relationship between inflation and interest rates?
If inflation is projected to be higher than this target, then central banks will typically increase their interest rates to make it more expensive to borrow and thus encourage people to save. Whereas if it is projected to be lower, it will decrease interest rates to allow for more economic growth by making borrowing less expensive and thus encouraging people to invest.
Related Questions
- When to Purchase U.S. Savings Bonds So if the interest rates on bonds are falling consistently and sometimes even lag behind the rate of inflation, why would anyone be concerned with purchasing them?
- Considering high interest rates and inflation, how should one go about investing fixed income?
- What is relation between Inflation and Bank interest Rates?
