Last week, the central banks of the US, UK, Sweden, Switzerland and Norway raised interest rates. For four out of the five, it wasn't the first significant hike of the year. Beyond the headline figures, what do these rate increases mean for the broader economy and people's everyday lives?
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More interest on savings: Higher interest rates are supposed to encourage people to save more. So if you have money in a bank account that pays interest, your savings could go up.
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Higher loan repayments: As central banks raise rates, banks will transfer the brunt to those repaying their mortgages with variable interest rates. According to the BBC, a typical tracker mortgage in the UK will go up by £49 a month after the recent rate hike.
- Recession fears: An implication of driving people to save more and spend less can be reduced demand for goods and services, leading to companies freezing hiring or redundancies. A potential consequence of this could be the stalling of economic growth or, worse, a recession. Aggressively rising interest rates worldwide have economists warning of implications ranging from a devastating global recession to debt crises in the developing world.
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