An increase in interest rates is a monetary policy taken by a country’s central bank to control inflation, influence economic growth, and regulate the flow of money in the economy. When interest rates rise, borrowing costs become higher, impacting various sectors of the economy. The impact is not only felt domestically, but also affects the global economy. One of the main impacts of rising interest rates is a reduction in consumer spending. When interest rates rise, individuals and families tend to reduce their spending, especially on big-ticket items such as homes and cars, which are usually financed with loans. A decline in consumer spending can slow domestic economic growth and have a domino effect on other countries connected through international trade. Apart from that, companies are also feeling the impact of rising interest rates in the form of higher borrowing costs. With more expensive loans, companies may delay investing in new projects or expansion, which could hurt innovation and long-term growth. If large companies, especially those involved in international trade, experience a decline in investment, the impact could spill over into global markets. The increase in interest rates also affects currency exchange rates. Higher interest rates can attract capital flows from abroad, causing the country’s currency to strengthen. However, a strengthening currency can make exports more expensive and reduce competitiveness in international markets. This can be detrimental to exporters, especially in developing countries that depend on export markets for their economic growth. In the context of inflation, interest rate increases are often used to control the prices of goods and services. Although this policy is effective in reducing inflation, its impact can be counterproductive if it is too aggressive, causing the economy to enter a recession phase. Countries experiencing a recession can be trapped in a negative cycle, where unemployment rises and global demand declines. Interest rate increases also play a role in defining fiscal policy. The government must adjust spending and taxes to maintain positive economic growth. Highly indebted countries can be squeezed by rising interest costs, leading to reduced funding for public services and infrastructure. Finally, stock market dynamics are often affected by changes in interest rates. Rising interest rates can cause investors to shift from stocks to safer financial instruments. Stock market volatility may increase, adding to uncertainty for global investors. Thus, rising interest rates have far-reaching chain effects, changing the entire global economic landscape. Analyzing the impact of rising interest rates is important for understanding how economies are interconnected on a global level. Central banks should consider these actions carefully, considering the long-term effects on domestic economic resilience and global stability.