Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They play a crucial role in the economy, influencing consumer spending, business investment, and inflation. Central banks, like the Federal Reserve, adjust interest rates to manage economic growth and stability. When interest rates rise, borrowing becomes more expensive, which can slow down economic activity. Conversely, lower interest rates encourage borrowing and spending, stimulating the economy. Understanding interest rates is essential for making informed financial decisions, whether you're taking out a loan or saving for the future.