What is Interest Rate?
An interest rate is the cost of borrowing money or the reward for saving it, expressed as a percentage. Central banks adjust benchmark rates to influence inflation and growth.
Example
When a central bank raises rates, mortgages and loans get more expensive, which tends to cool spending and inflation.
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Related terms
Inflation
Inflation is the rate at which the general level of prices for goods and services rises over time, reducing the purchasing power of money. Moderate inflation is normal in a growing economy; high inflation erodes savings.
EMI
EMI (Equated Monthly Installment) is the fixed monthly payment a borrower makes to repay a loan, covering both interest and principal over the loan tenure.