Question

inflation will raise the interest rate why? someone investing money must consider this , is the investment over all going to compensate for the amount of inflation?

Answer 1

When the overall demand of the economy rises, people start buying more goods and services and thus the goods become more expensive. Consequently, the inflation increases. In order to control inflation, central bank raises the interest rate which reduces the amount of money supply in the economy to reduce demand and control inflation.

This is the relationship.

Someone investing must consider this as it related to the future value of investment products.

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