The interest rate level has a very important influence on the foreign exchange rate. If the interest rate of a currency rises, the interest income from holding the currency will increase, attracting investors to buy the currency; On the other hand, if the interest rate falls, the income from holding money will be reduced and the attractiveness of money will be weakened.

So it can be said that "the interest rate rises and the currency strengthens; When interest rates fall, soft money is prone to arbitrage. When a country shrinks its credit, the interest rate will rise, resulting in the interest rate difference in the international market, thus causing a large number of short-term funds to flow internationally. Generally speaking, capital will always flow from low-interest countries to high-interest countries.

Interest rate and consumption

Consumption, investment and export are considered as the troika of economic growth. China's economic growth is mainly driven by investment, while the United States is driven by consumption. Since China has not yet realized the marketization of interest rates, the government needs to regulate the benchmark interest rates of deposits and loans of commercial banks to achieve the role of economic regulation.

Interest rate can be regarded as the price of money. Interest rate will affect consumption, because the change of interest rate can adjust the distribution ratio of consumers' monetary income between consumption expenditure and savings in a certain period of time.

The higher the deposit interest rate, the greater the residents' propensity to save, the smaller their desire to buy and the lower their consumption expenditure. On the other hand, the lower the deposit interest rate, the smaller the propensity to save, the greater the desire to buy and the higher the consumption expenditure.

(3) Interest rate and investment

The influence of interest rate on investment scale is the influence of opportunity cost of investment on total social investment. In the case of constant investment income, the increase in investment cost caused by rising interest rates will inevitably make those investors with lower investment income withdraw from the investment field, thus reducing investment demand.

On the contrary, lower interest rate means lower investment cost, thus stimulating investment and increasing total social investment. This is only theoretical. Although lowering the interest rate will reduce the cost of borrowing money and give borrowers more incentive to borrow money for investment, there are other factors that affect investment, such as market expectations.

If investors predict that the market will fall into recession in the future, even if the central bank keeps lowering interest rates, the economy may still be in a downturn.

Extended data

The essence of interest rate

In terms of its manifestation, interest rate refers to the ratio of interest amount to total loan capital in a certain period of time. Interest rate is the interest level of unit currency in unit time, indicating the amount of interest.

Now, all countries regard interest rate as one of the important tools of macro-control. When the economy is overheated and inflation rises, it will raise interest rates and tighten credit; When the economy is overheated and inflation is controlled, interest rates will be lowered appropriately. Therefore, interest rate is one of the important basic economic factors.

Interest rate is an important financial variable in economics, and almost all financial phenomena and financial assets are related to interest rate to some extent. At present, countries all over the world frequently use interest rate leverage to implement macro-control, and interest rate policy has become the main means for central banks to adjust the supply and demand of money and then regulate the economy. Interest rate policy plays an increasingly important role in the monetary policy of the central bank.

Reasonable interest rate is of great significance to social credit and the economic leverage of interest rate, and the calculation method of reasonable interest rate is our concern.

Factors affecting bank interest rates

Interest rate refers to the ratio of interest to principal in a certain period, which is the factor and scale that determines the amount of interest. As the price of capital, interest rate is determined and influenced by many complicated factors, and the interest rate level is ultimately determined by the comprehensive influence of various factors.

First of all, the interest rate is influenced by the average profit level of the industry, money supply and demand and economic development. Secondly, it is influenced by price level, interest rate control, international economic situation and monetary policy.

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