ECONOMICS

Detailed explanation-1: -Interest rates affect the cost of borrowing money over time, and so lower interest rates make borrowing cheaper-allowing people to spend and invest more freely. Increasing rates, on the other hand makes borrowing more costly and can reign in spending in favor of saving.

Detailed explanation-2: -If you are a borrower, rising interest rates will usually mean that you will pay more for borrowing money, and conversely, lower interest rates will usually mean you will pay less. How much of an impact will all depend on whether your borrowing is tied more to short-term rates or longer-term rates.

Detailed explanation-3: -When interest rates are high, it’s more expensive to borrow money; when interest rates are low, it’s less expensive to borrow money. Before you agree to a loan, it’s important to make sure you completely understand how the interest rate will affect the total amount you owe.

Detailed explanation-4: -Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall. Similarly, to combat the rising inflation in 2022, the Fed has been increasing rates throughout the year.

Detailed explanation-5: -A large demand for loans prompts banks to raise charges for that money, so borrowing rates rise. Think of the loan as a product and the interest as its price. When inflation diminishes the buying power of a dollar, it takes more dollars to buy any product, including loans.