Interest rate policy refers to the strategies used by central banks, like the Federal Reserve, to manage the economy by adjusting interest rates. By raising or lowering these rates, central banks influence borrowing costs for consumers and businesses, which can affect spending and investment. Lower interest rates typically encourage borrowing and spending, while higher rates can help control inflation by making loans more expensive. Central banks use interest rate policy as a tool to achieve economic goals, such as stable prices and full employment. Changes in interest rates can impact various aspects of the economy, including mortgage rates, credit card rates, and overall economic growth.