Question

Higher interest rates likely to?

Answer 1

Answer:

The Central Bank usually increase interest rates when inflation is predicted to rise above their inflation target. Higher interest rates tend to moderate economic growth. Higher interest rates increase the cost of borrowing, reduce disposable income and therefore limit the growth in consumer spending.

Answer 2

Answer:

Higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall. A good example of this occurred between 1980 and 1981. Inflation was at 14% and the Fed raised interest rates to 19%.