Hi. The National and Central Banks are constantly watching out for inflation, and they follow every small move of the economy with all their attention. Every now and then we hear about new interest rates which are announced by them. Is there a big importance in adjusting interest rates when inflation occurs?
Of course. While inflation is never avoidable altogether, the National Banks are always striving to keep it around a certain level, in Europe this is two per cent for instance. In order to not through the economy out of balance, the interest rates need to be adjusted when there is a higher level of inflation, as does any other part of the economy.
