What Factors Influence Interest Rates?

Interest rates are determined by the interplay of credit demand and supply within the money market. An upsurge in the demand for credit results in higher interest rates, whereas a decline in demand leads to lower rates. Conversely, an excess supply of credit drives rates down, while a shortage of credit pushes rates up. The financial decisions made by individuals, businesses, and governments regarding saving and spending directly impact the dynamics of credit demand and supply.