An interest rate is the price of money over time. Borrowers pay it; savers and lenders receive it. It is the single number that connects monetary policy to the real economy — it shapes what a mortgage costs, what a business pays to expand, and what a saver earns for waiting.
Key takeaways
- Higher rates make borrowing dearer and saving more attractive, cooling demand.
- Rates and bond prices move in opposite directions.
- A rate below the inflation rate means real returns are negative.
