Why interest rates matter
5 cards · about a minute · 19 October 2026
- 1 of 5
An interest rate is the price of borrowing money.
- 2 of 5
When prices rise too fast, the central bank raises its rate to cool things down.
- 3 of 5
Rates ↑
Loans cost more
So businesses borrow less and people save more.
- 4 of 5
Rates ↓
Loans cost less
So borrowing, spending and hiring pick up.
- 5 of 5
For founders: when rates are high, investors usually get choosier.
Test yourself
When a central bank raises interest rates, loans usually…
- Get cheaper
- Get more expensive
- Stay the same
Show the answer
Get more expensive. Higher rates make borrowing cost more, which cools spending.
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