What happens to inflation when interest rates rise?

When interest rates rise, inflation tends to decrease. This is because higher interest rates make it more expensive for individuals and businesses to borrow money, which reduces spending and can lead to lower demand for goods and services. As a result, businesses may lower their prices to attract customers, which can help bring down inflation. Conversely, when interest rates are lowered, it can stimulate spending and increase demand, which can push up prices and contribute to inflation.

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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