Interest rates

What is an interest rate?

The cost of borrowing money or the return on saving, usually expressed as a percentage.

How do interest rates affect consumers’ decisions to save, borrow or spend?

Lower interest rates tend to increase spending and borrowing, while higher rates encourage saving and discourage spending.

What factors influence the different rates of interest?

Economic growth, interest rates and government policies.

How does economic growth influence interest rates?

When the economy is growing strongly, there's typically more demand for credit (borrowing) as businesses and individuals invest and spend. This increased demand for credit can lead to higher interest rates as lenders charge more for the privilege of borrowing. 

How do interest rates affect producers decisions to borrow, spend or invest?

Lower interest rates encourage borrowing and investment, while higher interest rates incentivize saving and can discourage borrowing.