Economics2 min read
Policy interest rateGerman: Leitzins
Policy interest rates are rates used by a central bank to guide monetary policy and influence financing conditions.
In plain language
They affect borrowing rates, savings rates, demand and prices through banks and markets. Transmission is neither immediate nor equally strong everywhere. Central banks may set several different policy rates.
Let’s make it concrete
Higher policy rates can make new borrowing more expensive. Businesses and households may then reduce debt-financed spending.
Simplified example for illustration.Worth understanding
The policy rate is not the rate every bank directly pays on your account. Product rates depend on other factors.
Read more from official sources
For further learning and reference:
Financial education for orientation. No individual investment, tax or legal advice.
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