What the Indicator Shows
Central banks raise or lower the policy rate with the aim of achieving price stability and sound economic development. Raising the rate is called a "rate hike" and lowering it a "rate cut," and the policy rate broadly affects corporate funding costs as well as individual mortgage and deposit rates.
Relationship to the Markets
There is a common view that rising interest rates tend to weigh on stock prices — through higher borrowing costs and a higher discount rate applied to future profits — while falling rates tend to support them. In practice, however, stock prices are formed by reflecting many factors, including the state of the economy and corporate earnings, so future stock price direction cannot be predicted from interest rate movement alone.