Interest rates are the amount a financial institution pays you for your deposit whether it’s in a savings account or term deposit. Inflation is the decline in purchasing power of money over time. For example, $100 today will not buy you the same amount of goods in 10 years because inflation will have increased their cost, decreasing the amount your money can buy. Putting your funds into investments that at least match the inflation rate helps protect your purchasing power. When interest rates are low that could mean having to take more risk in order to match inflation.
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