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What are Rate Decisions?
A country’s central bank sets rate decisions and will influence how much retail banks charge on loans and the pay of savings. Interest rates are part of a country's monetary policy, which the central bank uses to control economic conditions, inflation and employment. The interest rate may be changed to support growth by lower rates or pressure the economy through higher interest rates.
Why is it important to the currency?
Interest rates are one of the main driving factors for currencies. Therefore interest rate decisions and forward guidance can significantly change the currency’s valuation. Higher interest rates lead to bullish price movement, and lower interest rates lead to bearish price movement.
Why is it important to the Stocks?
Interest rates affect the stock market as much as currencies. Higher interest rates make fixed accounts and bonds more attractive, meaning the stock market sees less investor demand. In addition, higher interest rates significantly lower consumers’ disposable income, putting companies at risk.
For this reason, when interest rates increase, the stock market, including indices, declines. When interest rates decrease, the stock market may increase in value.