what is Base Interest Rate?

 

Base Interest Rate 

Base Interest Rate 

The base interest rate is the standard rate set by a country’s central bank — such as the Bank of Korea or the U.S. Federal Reserve — that influences all other interest rates in the economy.

It affects loans, savings, investments, and overall economic activity.

🔹 What It Means

When the base rate rises, borrowing becomes more expensive → spending and investment often decrease.

When the base rate falls, loans become cheaper → spending and investment tend to increase.

🔹 Why It Matters

Controls inflation: Higher rates slow price increases.

Supports economic growth: Lower rates encourage spending.

Affects currency value: Higher rates can strengthen a country’s currency.

🔹 Example

If the Bank of Korea raises the base rate from 3.25% to 3.5%, banks usually increase loan and mortgage rates too.

Tags:

#InterestRate #Economy #Finance #CentralBank #Inflation

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