FOREX THEORY
Why Interest Rates Matter for Forex Traders (Part 2)
In an effort to keep inflation at a comfortable level,
central banks will mostly likely increase interest rates, resulting in lower
overall growth and slower inflation.
This occurs because setting high interest rates normally
forces consumers and businesses to borrow less and save more, putting a damper
on economic activity. Loans just become more expensive while sitting on cash
becomes more attractive.
On the other hand, when interest rates are decreasing,
consumers and businesses are more inclined to borrow (because banks ease
lending requirements), boosting retail and capital spending, thus helping the
economy to grow.
Yippee!
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