Rate at which the central bank lends money to the commercial banks.
Controlling these rates is the most common way to regulate the economy and the flow of money
- Borrowing money costs more and fewer credits are made
- Cash money is flowing, companies and people control their expenses
- Less spending slows down the economy
- Inflation tends to fall
- Borrowing is cheaper
- More money starts flowing and being spent/invested
- Inflation tends to rise
→ The rate charged by the central banks
→ Nominal Interest Rate - Inflation Note: the real rate could be negative and the inflation could eat part of the debt if the income grows parallel with it.
