Interest rates – frequently asked questions (FAQ)

The joint goal of the central banks of the euro area is to maintain price stability. Price stability is defined by a target of average inflation in the euro area of 2%. For almost a decade the problem in the euro area and in the world generally was that inflation was too low, but from the middle of 2021 inflation in the euro area as a whole has been a long way above 2%. The main tool available to central banks for bringing high inflation down is raising interest rates. Rises in interest rates since July 2022 have been sharp, but central banks have no better way of getting high inflation under control. These rises may be painful in the short term, but they will prevent inflation remaining high for a longer time, and so will support purchasing power over the long term.

Why do people borrow? Why is borrowing sometimes very cheap and sometimes very expensive?

How rising central bank interest rates affect people's wallets

The impact of higher interest rates on the economy, jobs, business and state finances

The broader impact of higher interest rates on society

The outlook for interest rates

Published July 10, 2023.