What are all the possible effect s of a rise in Interest rate?
Holding everything else equal, a rise in the Interest rates will “curb” the economy’s growth, which in turn will decrease inflation. However, higher interest rates will cause an influx of foreign investments, this in turn will put pressure on the country’s currency to appreciation, an appreciation of a currency will cause imports to go up and exports to go down which will create a deficit. I would also argue that a rise in interest rates will shift preferences from consumption to saving (PV of \< FV of ).