Series 65: Inflation And Interest Rates

Inflation and Interest Rates

Inflation can result when demand for goods and services outstrips their supply. This usually occurs near the end of an expansionary phase when too much money is chasing too few goods. Inflation can occur because of:

• • High consumer confidence in the economy
• • An economy that has reached its production potential
• • Excess money in the economy
• • Increases in wages and other production costs

With rising prices come rising interest rates. If the cost of living is increasing at