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Relation Between Inflation And Interest Rates

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For central banks to control inflation and keep it within the target, they use the weapon of interest rates. The bank raises interest rates to prompt households to put their money in banks and thereby absorb excess liquidity from the market, resulting in the fall in inflation rate and the opposite is true.

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Ahmed Mamdouh Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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