What are central bank rates?

A central bank rate is like a special price that helps control how much money flows around in the economy.

Imagine you're at a lemonade stand. If you want more people to buy your lemonade, you might lower the price. That’s what a central bank does when it lowers its rate, it makes borrowing money cheaper for everyone else, just like lowering the price of lemonade.

Think of the central bank as a grown-up who helps decide how much money should be in the economy at any time. The rate is like the cost of borrowing that money.

• If the rate is low, it’s like getting a discount on your lemonade, people borrow more money and spend it.
• If the rate is high, it's like raising the price of lemonade, people borrow less, and things slow down.

This special price can help make sure the economy doesn’t get too hot (too much spending) or too cold (not enough spending). Just like how you adjust your coat depending on the weather!