The interest rate can be understood as the “price of money.” It’s how much money you have to pay (in interest) to get money (take out a loan) in order to invest in something. When interest rates are low, money is cheap—so people want to take out loans, and use that money to start businesses, invest in the stock market, or buy a house. When interest rates are high, money is expensive, and people are more wary of spending or borrowing it. They’re not going to take out loans unless they’re really, really sure that their investment is going to pay off.
