Current interest RatesActual interest rates
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Bank rates and interest rates
Changing the base rate affects how much one spends. So, if we modify the base rate, we can affect price and price inflation. What we can do is affect them. Our goal is to keep the rate of Inflation at 2% - that is the government's goal. What is the impact of the key interest rate on expenditure and headline inflation? What are the reasons for this? The impact of the key interest rate on you depends in part on whether you take out loans or save cash.
When interest rates drop and you have a credit or mortgages, your interest rates may become lower. And if you have life insurance deposits, you can get less interest. When interest rates drop, it is also less expensive for homes and companies to raise the amount they lend and less lucrative to do so.
All in all, we know that if we lower interest rates, this will lead to an rise in expenditure, and if we rise interest rates, it will lead to a fall in expenditure. In order to achieve our objective of achieving our goal of hyperinflation, we need to assess how much money we want to conserve and how much we want to pay at current interest rates. If, for example, individuals overspend, this will diminish the economy and cause individuals to loose their job.
Then we can lower interest rates to help cover expenses. In the midst of the global economic downturn, individuals began to reduce their expenditures and many even left their job. In order to help sustain expenditure and employment, we had to lower interest rates to an unusually low level. Things have changed, however, and we have recently increased interest rates.
For more information, see our Inflation Report Executive summary.