Interest rates are crucial in the financial world, influencing the economy by encouraging individuals and businesses to take loans, such as for homes, cars, or personal use. These rates are what borrowers pay on top of the principal amount, affecting how much you end up paying back to banks or financial institutions. The determination of interest rates is primarily influenced by the supply and demand of credit in the money market. High demand or low supply of credit leads to higher interest rates, while low demand or high supply results in lower rates. This dynamic plays a significant role in the cost of borrowing and the incentives for saving. The Bangko Sentral ng Pilipinas (BSP) does not directly regulate bank interest rates but sets key policy rates affecting overall lending and borrowing costs. However, in exceptional circumstances, such as economic crises, the BSP can intervene to regulate rates, as seen during the COVID-19 pandemic when it capped credit card charges.
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Understanding Interest Rates: How They Work and Impact You

Interest rates are crucial in the financial world, influencing the economy by encouraging individuals and businesses to take loans, such as for homes, cars, or personal use. These rates are what borrowers pay on top of the principal amount, affecting how much you end up paying back to banks or financial institutions.

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