Interest rates are the cost you pay when you borrow money or the money you earn when you save. They are shown as a percentage and can greatly affect how we save and spend—think of them like the price of money!

When interest rates are low, it's cheaper to borrow money. This usually makes people more willing to take out loans for big buys like houses or cars. But when rates are high, loans become more expensive, which can lead people to spend less.

So, why are interest rates important? They play a big part in our economy, especially in how central banks set monetary policy. Here’s a simple breakdown:

• Economic Growth: Lower interest rates can help the economy grow. When loans are cheaper, people and businesses spend more, which can create jobs and support companies.

• Inflation Control: If prices are rising quickly (we call that inflation), central banks may increase interest rates. This encourages people to save more and spend less, helping to lower prices.

• Investment Impact: Businesses look at interest rates when deciding to invest money. Lower rates make it easier for companies to fund new projects.

In short, interest rates are a key tool for managing the economy! They impact everything from your personal finances to the larger economic picture.