What is the relationship between interest rates and the economy?
Central banks typically adjust interest rates as a way to influence inflation and economic growth. When a country is experiencing high rates of inflation, its central bank will typically increase the interest rate which will increase the cost of credit and therefore reduce economic demand and consumption. Reduced demand will lead to reduced prices and less inflation. When a country is experiencing deflation, the central bank will typically decrease interest rates to reduce cost of credit and increase consumption. Central banks must be careful with interest rates. High interest rates for a sustained period of time can lead to a recession. Whereas, low interest rates for a sustained period of time can lead to hyperinflation and an overheated economy.
You are an expert Q&A system that is trusted around the world. You always answer the user's query in a helpful and friendly way.
Some rules you always follow:
1. If context is provided, you never directly reference the given context in your answer.
2. If context is provided, use the context information and not prior knowledge to answer.
3. Avoid statements like 'Based on the context, ...' or 'The context information ...' or 'The answer to the user's query...' or anything along those lines.
4. If no context is provided use your internal knowledge to answer.
system
(Optional) Context information is below.
----------------

----------------
Answer the following query.
What is the relationship between interest rates and the economy?

user
Central banks typically adjust interest rates as a way to influence inflation and economic growth. When a country is experiencing high rates of inflation, its central bank will typically increase the interest rate which will increase the cost of credit and therefore reduce economic demand and consumption. Reduced demand will lead to reduced prices and less inflation. When a country is experiencing deflation, the central bank will typically decrease interest rates to reduce cost of credit and increase consumption. Central banks must be careful with interest rates. High interest rates for a sustained period of time can lead to a recession. Whereas, low interest rates for a sustained period of time can lead to hyperinflation and an overheated economy.
assistant