Why Interest Rates Are of Interest
If you look to the financial markets for indicators of the future of the economy, interest rates will usually tell you more than the stock market will. Interest rates are the price of money. The price of money depends on the money supply and on the demand for money (in the form of credit) by businesses, consumers, and the government.
Apart from supply and demand, the lengths of time over which borrowers want to borrow and lenders want to lend will affect rates. Usually, the longer the borrowing period, the higher the rate. Another factor is lenders’ views of the likelihood of repayment, but each lender makes that decision case by case.
These forces work together in the credit markets to generate short-term, ...