Factors causing rise in interest rate?
Answer:
In a nutshell, it's supply and demand. When demand increases or supply decreases for money, the interest rate (price of money) that must be paid to use it increases. Some common factors would include economic expansion (demand - corporate growth, low unemployment), lower consumer savings rate (supply) or higher personal debt via credit cards and mortgages (demand), fed monetary supply policy (If the fed raises rates, it ripples throughout the capital markets), foreign monetary policies (high interest rates overseas compete for local investment dollars, lessening US demand for money), inflation and willingness of financial institutions to lend money - their perceived risk in the market.
high money demand, inflation and the selling of government bond by reserve bank will lead to the interest rate to go up.
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