How Interest Rates Influence Stock Markets

Explore the inverse relationship between interest rates set by central banks and the valuation of the stock market.

A data chart showing the relationship between inflation and interest rates.

When central banks raise interest rates to fight inflation, borrowing becomes more expensive for companies and consumers, which can slow down economic growth and hurt corporate profits. This often leads to lower stock prices. Conversely, lower rates can stimulate the economy and boost the market.