Interest Rate Setting

Interest rate setting refers to how central banks, like the Federal Reserve in the U.S., determine the cost of borrowing money. They adjust rates to influence economic activity: lowering rates encourages borrowing and spending, helping stimulate growth, while raising rates can cool off an overheating economy and control inflation. These decisions consider various factors, such as inflation, employment levels, and overall economic performance. The rates set by central banks also influence how much consumers pay for loans, mortgages, and credit, ultimately impacting everyday financial decisions and the economy's health.