Interest rates are used to control the supply of money and how plentiful the supply of credit is. In Germany, interest rates went negative in a bid to encourage spending, but paradoxically made people put away more for their retirement because they anticipated low future interest rates on savings. McLeish and others say it really comes down to whether the spike in inflation through supply chain shocks and wage pressures proves permanent. The Reserve Bank has signalled a path to lifting interest rates on the back of a recovering economy while bank economists have been calling for interest rates to go higher, sooner. This is a signal it needs its banks to lend more, and could also be a sign we are worrying about inflation too soon.

Source: Stuff July 13, 2021 16:52 UTC