How is interest rate and inflation related?

Interest rates and inflation are closely related. When the economy is strong and growing, demand for goods and services increases, which can lead to higher prices (inflation). In response, the central bank (such as the Federal Reserve in the U.S.) may raise interest rates to slow down inflation and keep it at a manageable level. Conversely, if the economy is weak and inflation is low, the central bank may lower interest rates to stimulate growth.

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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