inflation and its impact on interest rates

Inflation refers to the increase in prices of goods and services over time. It impacts interest rates as it affects the purchasing power of money. When inflation is high, the value of money decreases, which makes lenders demand higher interest rates on loans to compensate for the lost value. Additionally, central banks may raise interest rates to control inflation, as higher rates make borrowing money more expensive and slow down spending, helping to keep prices in check.

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