Interest rates are an indicator of the cost of money in the currency market. It is of such importance not only because of the enormous impact of interest rates on financial markets, but also because it is essential for ordinary people. Borrowing, financial management and even consumption are inextricably linked to interest rates. So what factors would constitute a country ' s interest rate? This paper will be explored from several perspectives。

What are the determinants of interest rates

1. Economic and environmental factors

The economic environment of the country is one of the most important factors affecting interest rates. The good and bad economic situation directly affected the supply of and demand for money, thus affecting the level of interest rates. For example, in the wake of the 2008 subprime mortgage crisis in the United States, the Government helped to stimulate economic development by lowering interest rates in order to stimulate it. The stability of economic conditions, as well as growth expectations and changes in inflation rates, can also affect interest rates。

2. National policy elements

National policies will also affect, to a large extent, the level of interest rates. For example, the Government regulates the high and low interest rates by requiring limits on the reserve rate of bank deposits, central bank open market transactions and government taxes. In addition, legal and policy restrictions on borrowing rates may also result in banks not being able to freely adjust interest rates on loans。

3. Market trend factors

Market trends are also an important factor in determining interest rates. In general, when the economic outlook is good, investors consider the risk to be low and there are incentives for investment. Interest rates are often low at this time. As borrowers benefit from lower borrowing costs, banks prefer to lend at lower interest rates. When economic prospects are poor, however, there is a tendency to reduce investment and to replace it with savings, so that banks, in contrast, raise interest rates to attract depositors。

4. Guarantee factor

Guarantee is the amount of money that the seller or buyer must pay for a specified period of time, or at a specified rate, to keep the positive balance. Guaranteed gold can make commodity transactions safer. Changes in the rate of the guarantee will also directly affect interest rates, low bonds, higher risk for borrowers and higher interest rates for banks。

In sum, the factors that make up interest rates are multifaceted and vary according to economic, policy and market changes. A proper understanding of the factors will make it possible to better capture financial decisions such as borrowing, investment and better plan the financial situation of individuals or companies。