⚠️ 📢 Shocking ! Rate Revelation! What interest Rates need to be to Help Curb Inflation ⚠️ 📢 🚨

Low, stable and predictable
To achieve the inflation target, the Bank adjusts (raises or lowers) its key policy interest rate. If inflation is above the 2 per cent target, the Bank may raise the policy rate. This prompts banks to increase interest rates on their deposits, loans and mortgages. Higher interest rates encourage saving and discourage borrowing and, in turn, spending. In response, companies increase their prices more slowly or even lower them to encourage demand. This reduces inflation. Lower interest rates work in the opposite way and can help increase inflation if it is too low.

Of course, the Bank doesn’t respond to every movement in inflation or focus on prices that jump around a lot. Nor does it pay attention to one-time changes in price levels, such as those caused by a new sales tax rate. The Bank focuses on price changes that are more widespread and persistent—ones that could push inflation away from the target for a while. This is because any changes the Bank makes to the policy interest rate will take time to affect people’s spending.