How inflation affects interest rates?

Inflation and interest rates are closely related. When the inflation rate is high, interest rates also tend to be high. This is because lenders will charge higher interest rates to compensate for the decrease in purchasing power of the money they lend, due to inflation. Additionally, central banks will often raise interest rates to help curb inflation. On the other hand, when inflation is low, interest rates also tend to be low. This is because lenders do not need to charge as high of interest rates to compensate for the decrease in purchasing power of the money they lend. In this way, interest rates can be used as a tool to help stabilize prices and keep inflation under control.

The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.

 

At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.

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