Why are interest rates currently so high globally?

Interest rates are currently high because money is more expensive to borrow right now.

Imagine you have a piggy bank, and you want to buy a toy that costs $10. If you save up your coins, it takes time, maybe months or even years. But if you ask your parents for a loan, they might let you pay them back later, but with a little extra at the end. That extra is like interest.

Now picture everyone in town wants to borrow money at once. Maybe they all want new bikes, or bigger piggy banks. If too many people are asking for loans at the same time, the bank, which is like the town's money lender, might say, “Okay, we’ll lend you money, but you need to pay us back with a little more.”

That’s what’s happening now globally: lots of countries and banks are lending money, and they want to be paid back with a bit extra. So interest rates have gone up.

When interest rates go up, it's like paying more for that toy, or maybe even putting off buying it until later. People and businesses might slow down on big purchases because the cost is higher now. That’s why things feel a little tighter in the economy right now, it's like everyone is saving more before they spend.