Expert in economics Salah Nouri confirmed today, Sunday, that one of the primary tools of monetary policy that the Central Bank uses to influence the economy is lowering the interest rate, whether by increasing or decreasing it in response to rates of inflation or deflation.
In an interview with dinaropinions.com, Nouri stated that “reducing the interest rate encourages individuals and businesses to borrow for productive projects, which leads to stimulating the economy.” Loan costs are reduced when interest rates are lower, which encourages spending and investment.
“Reducing the interest rate may push depositors to withdraw their deposits due to the decrease in returns, and resort to alternative investments such as gold,” Nouri warned, pointing out that “reducing the interest rate reduces the cost of production and perhaps the prices of imported goods, which leads to a reduction in selling prices.”
“Added he: Because facilitating borrowing may affect the elasticity of demand versus supply, it is necessary for the Central Bank to monitor the money market and commodity prices in order to measure inflation.”
