Transmission Mechanism -

: If people believe the central bank will keep inflation low, they may moderate their own price-setting and wage demands. 🦠 Disease Dynamics

In economics, this describes how a central bank's policy decisions (like changing interest rates) travel through financial markets to impact businesses and households. Key Channels of Impact transmission mechanism

: Interest rate shifts change the value of the local currency, making imports or exports cheaper or more expensive. : If people believe the central bank will

: Changes in policy rates affect the cost of borrowing for cars, homes, and business investments. : Changes in policy rates affect the cost

: Affects the willingness of banks to lend; higher rates can reduce a borrower's net worth, making them appear riskier to lenders.

: Lower rates often boost the value of stocks and housing, increasing household wealth and spending power.