![]() Governments increase interest rates to incentivize people to save a larger chunk of their disposable income and decrease discretionary spending, in turn, decreasing consumer prices.Īs the economy continues to grow rapidly and unemployment rates decrease in the United States, the US Commerce Department announced the strongest increase in annual inflation in nearly a year. Shortly after inflation increases, interest rates begin to increase to control inflation (generally to 2%). ![]() This is where interest rates, inflation’s best friend, comes into play. Both of those factors push prices up for consumers, which in turn, increases inflation rates. This increases consumer’s disposable income and increases the cost of wages for companies. But what increases inflation? Well, economic growth is generally followed by a stronger and growing labor market, which means that unemployment is down and wages are increasing. In simple terms, inflation rates measure what has happened to consumer prices over the latest 12-month period. ![]()
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