High-interest-rate policy

What is high-interest-rate policy?

All central bank measures aimed at increasing the interest rate level of the respective currency or maintaining it at a high level are understood under the term high-interest-rate policy. These measures are usually aimed at battling inflation to reduce the amount of money in circulation. The central bank also wants to prevent an outflow of capital into other currencies whose interest rates are higher than the domestic currency. A high-interest-rate policy also curbs investment in order to prevent the economy from overheating. This means that an investor must expect higher interest rates when taking out a loan.