What does interest rate hike mean?

An interest rate hike in finance refers to an increase in the cost of borrowing money. When the central bank or monetary authority raises interest rates, it makes it more expensive for individuals and businesses to borrow money, as they will have to pay higher interest on their loans. This can have various effects on the economy and financial markets. For consumers, an interest rate hike means higher costs for mortgages, car loans, credit cards, and other forms of borrowing. It can also lead to lower disposable income, as higher interest payments reduce the amount of money available for spending and saving. Businesses also face increased costs when interest rates rise, as they may have to pay more for financing their operations and investments. This can lead to reduced profitability and potentially slower economic growth. In financial markets, an interest rate hike can lead to changes in the prices of stocks, bonds, and other assets. Higher interest rates can make fixed-income investments more attractive, leading to a shift in investor preferences and potentially impacting stock prices. It can also affect the exchange rate of a country's currency, as higher interest rates can attract foreign investors seeking higher returns. Overall, an interest rate hike is a significant event in finance that can have widespread implications for individuals, businesses, and financial markets. It is closely monitored by investors, economists, and policymakers for its potential impact on the economy.