How interest rates affect us
If you are a follower of the economic press, one of items of news that has had more impact these days is the decision by the monetary authorities of both the United States and Europe to reduce the interest rate of money or announce future reductions in their respective areas of action. The question is, do these movements of high economic spheres really affect ordinary citizens? Do they have an influence on our day-to-day economy? The answer, although we don’t believe it, is yes, especially if we are small entrepreneurs. How changes in interest rates affect us When a Central Bank lowers the interest rate of money, what it is doing is lowering the price of money. Because, indeed, money has a price, the interest that central banks charge to commercial banks for lending them money. And yes, commercial banks are the ones who lend money to us. We start to see the relationship, right? A reduction in interest rates of money what it does is to encourage banks to lend money more easily, less i