Why do interest rates change?

Answer: Central banks manage inflation

Central banks manage inflation ✓ — Correct! Central banks (like the Federal Reserve) raise or lower base interest rates to manage the economy. High inflation? Raise rates to slow borrowing and spending, cooling the economy. Recession? Lower rates to encourage borrowing, investment, and spending. Banks adjust their rates accordingly. It's a key economic management tool.

Politicians set rates for votes — Wrong. In most developed countries, central banks are politically independent to prevent short-term political manipulation. Politicians don't directly control interest rates—central bank experts adjust rates based on economic data, not electoral cycles.

Interest rates never change — Wrong. Interest rates change frequently based on economic conditions. Central banks adjust rates to manage inflation and employment. Market rates fluctuate based on supply/demand for credit, risk levels, and inflation expectations.