Editing Interest rate (section)

==Reasons for changes==
[[File:Interest rates.webp|thumb|350px|Prime rate floats about 3% above the federal funds rate.
{{legend-line|#80699B dotted 3px|Credit card interest rates}}
{{legend-line|#4572A7 dotted 3px|[[Auto loan]] interest rate 48 months new autos}}
{{legend-line|#3D96AE solid 3px|[[Prime rate]] }}
{{legend-line|#BD10E0 solid 3px|[[Government bond|10 year Treasury bond]]}}
{{legend-line|#AA4643 solid 3px|[[United States Consumer Price Index]]}}
{{legend-line|#89A54E solid 3px|[[Federal funds rate]] }}
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* '''Political short-term gain''': Lowering interest rates can give the economy a short-run boost. Under normal conditions, most economists think a cut in interest rates will only give a short term gain in economic activity that will soon be offset by inflation. The quick boost can influence elections. Most economists advocate independent central banks to limit the influence of politics on interest rates.
* '''Deferred consumption''': When [[money]] is loaned the [[lender]] delays spending the money on [[Consumption (economics)|consumption]] goods. Since according to [[time preference]] theory people prefer goods now to goods later, in a free market there will be a positive interest rate.
* '''Inflationary expectations''': Most economies generally exhibit [[inflation]], meaning a given amount of money buys fewer goods in the future than it will now. The borrower needs to compensate the lender for this.
* '''Alternative investments''': The lender has a choice between using his money in different investments. If he chooses one, he forgoes the returns from all the others. Different investments effectively compete for funds.
* '''Risks of investment''': There is always a risk that the borrower will go [[Bankruptcy|bankrupt]], abscond, die, or otherwise [[Default (finance)|default]] on the loan. This means that a lender generally charges a [[risk premium]] to ensure that, across his investments, he is compensated for those that fail.
* '''Liquidity preference''': People prefer to have their resources available in a form that can immediately be exchanged, rather than a form that takes time to realize.
* '''Taxes''': Because some of the gains from interest may be subject to [[Tax|taxes]], the lender may insist on a higher rate to make up for this loss.
* '''Banks''': [[Bank|Banks]] can tend to change the interest rate to either slow down or speed up economy growth. This involves either raising interest rates to slow the economy down, or lowering interest rates to promote economic growth.<ref>Commonwealth Bank [https://www.mywealth.commbank.com.au/learn/choosing-investments/why-do-interest-rates-change Why do Interest Rates Change?] {{webarchive|url=https://web.archive.org/web/20140226001350/https://www.mywealth.commbank.com.au/learn/choosing-investments/why-do-interest-rates-change |date=2014-02-26 }}</ref>
* '''Economy''': Interest rates can fluctuate according to the status of the economy. It will generally be found that if the economy is strong then the interest rates will be high, if the economy is weak the interest rates will be low.