Why Do Inflation and Interest Rates Fight Like Rivals?

Imagine inflation is a kid who keeps raising the price of candy. Interest rates are like the rules that tell banks how much to charge when you borrow money. When one goes up, the other often tries to slow it down, just like kids trying to win a game.

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Examples

  1. A candy bar that used to cost $1 now costs $2
  2. Your mom says you can’t borrow money unless you pay back twice as much
  3. Everyone starts saving more instead of buying candy

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Categories: Economics · inflation,interest rates,economy,monetary policy,money