When it comes to inflation interest rates are one of the most important factors. This is because interest rates can have a direct effect on inflationary pressures. When inflation is low interest rates are usually low as well. This is because when inflation is low there is less demand for money and credit. This can lead to higher interest rates and inflationary pressures.
Conversely when inflation is high interest rates are usually high as well. This is because when inflation is high there is more demand for money and credit. This can lead to higher interest rates and inflationary pressures.
So how do interest rates affect inflation?
Interest rates can have a direct impact on inflationary pressures. When inflation is low interest rates are usually low as well. This is because when inflation is low there is less demand for money and credit. This can lead to higher interest rates and inflationary pressures.
Conversely when inflation is high interest rates are usually high as well. This is because when inflation is high there is more demand for money and credit. This can lead to higher interest rates and inflationary pressures.
Inflation can also have an indirect impact on interest rates. When inflation is high it can lead to higher interest rates. This is because when inflation is high there is more demand for money and credit. This can lead to higher interest rates and inflationary pressures.
Conversely when inflation is low it can lead to lower interest rates. This is because when inflation is low there is less demand for money and credit. This can lead to lower interest rates and inflationary pressures.
