Interest Rate Policy

Interest rate policy refers to the actions taken by a country's central bank to influence the economy by adjusting interest rates. When rates are lowered, borrowing becomes cheaper, encouraging spending and investment; when rates are raised, borrowing costs increase, which can slow down spending and help control inflation. Central banks use these adjustments to maintain economic stability, promote growth, and manage inflation, aiming to balance employment and price stability. Essentially, it’s a tool to steer the economy toward desired outcomes.