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NC State Economist Mike Walden – “Understanding Interest Rates”

Mary: This is Mary Walden with economist MW welcoming you to the economic perspective. Today’s program tries to understand interest rates.  Mike, whenever there’s a discussion about the economy, the topic of interest rates usually comes up.  Why are interest rates always a concern?

Mike:  Summary Answer

  1. Because they represent many facets of the economy
  2. Reflect inflationary expectations – the more inflation is expected, the higher are rates
  3. Reflect growth expectations – faster growth usually means more demand for loans and higher interest rates
  4. Also reflect rewards for saving and cost of borrowing
  5. Here the key is the real interest rate – observed rate minus inflation
  6. Higher the real rate – more benefits from saving
  7. Lower the real rate – cheaper borrowing
  8. I’m MW

Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service.'

A native of the Texas Panhandle, Rhonda was born and raised on a cotton farm where she saw cotton farming evolve from ditch irrigation to center pivot irrigation and harvest trailers to modules. After graduating from Texas Tech University, she got her start in radio with KGNC News Talk 710 in Amarillo, Texas.