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Differences between the Foreign Exchange Market and Stock Market May 23, 2022
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Interest Rates

Mira Team by Mira Team
January 4, 2021
in Forex Terms
Reading Time: 1 min read
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Definition – What does Interest Rates mean?

Interest rates refer to the extra money a borrower must pay above the principal amount of a debt. Interest rates function on multiple levels, as individuals pay interest on money they borrow from banks and banks pay interest on money they borrow from investors and each other, and governments pay interest on the money they borrow from banks and the public. In forex, the interest rates that matter most to traders are the rates that a central bank demands from commercial banks. The rate set by central banks will influence every other rate being offered across the economy.

ForexTerms explains Interest Rates

When it comes to forex, interest rates are important as a monetary policy tool. A country can spur or slow the economy by tightening (raising interest rates) or loosening (lowering interest rates) credit. Central banks often set inflation targets in order to encourage economic growth and then they realize these targets by adjusting interest rates. For this reason, forex traders watch interest rates to see how they will impact the underlying economy and currency. Simply put, interest rates are a fundamental driver of price action in the currency market.

ⓘ Mira FX is not liable for any damage or loss, including but not limited to, any loss of investment, which may be based either directly orindirectly on the use of or reliance on such information. Before deciding whether or not to take part in foreign exchange or financial markets or any other type of financial instrument, please carefully consider your investment objectives, level of experience and risk appetite.

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