Bonds, Interest Rates & Exchange Rates
What effects does a base rate hike have on the economy and markets?
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In theory, raising the base rate reduces the money supply, which helps cool an overheated economy, and market interest rates generally rise as well.
It is explained that share prices may fall and the exchange rate may decline at such times, and that the opposite may occur when the rate is cut. However, these are theoretical effects, and the real economy may show entirely different patterns.
This answer is general financial information as of 14/10/2026, not investment advice. Rules and tax rates change, so please also check the latest guidance from the source institution.