The central bank rate

Your bank pays 1% a year on savings, the bank next door pays 5%. Where will you move your money? Big investorsInvestorSomeone who buys an asset for years and waits for the company or the whole market to grow, without trying to guess price moves.In the glossary → think the same way, only they choose not between banks but between countries.

The central bank raises the rate to slow inflation down: loans are expensive, people and companies spend less, and prices rise more slowly. What usually happens when the rate is raised unexpectedly:

• the country's currency gets more expensive — people now pay more for it;
• stocksStocksA share in a company; the price depends on how the business is doing.In the glossary → get cheaper — it costs companies more to borrow;
• gold gets cheaper — it pays no interest, and savings now pay more;
• bonds get cheaper. A bondBondA debt in the form of a security: the buyer lends money to a government or a company, receives interest and gets the sum back at maturity; bond prices and interest rates move against each other.In the glossary → is an IOU from a government or a company that pays interest. When new ones appear with higher interest, nobody wants the old ones at the old price.