The Impact of Interest Rates and Inflation on the Stock Market

[Morenike Ifeolowa]

Interest rates and inflation are closely interlinked and have significant impacts on the stock market.

Interest Rates:When the Federal Reserve (or other central banks) raises interest rates, borrowing costs increase. This can slow down economic growth as consumers and businesses reduce spending and investment.

Inflation: High inflation erodes purchasing power, leading to reduced consumer spending. This can negatively impact companies’ revenues and profits, particularly in consumer discretionary sectors.Companies face higher input costs during inflationary periods, which can squeeze profit margins if they are unable to pass these costs onto consumers.

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