Rising interest rates have a significant impact on global markets. Some of the main effects of increasing interest rates include changes in capital flows, the effect on currency exchange rates, and the impact on inflation and economic growth. First, changes in capital flows are one of the most important impacts. When interest rates in a country increase, investors tend to withdraw investments from countries with lower interest rates and shift their funds to countries that offer higher returns. This can trigger a strengthening of the country’s currency, making exports more expensive and imports cheaper. As a result, the trade balance of exporting countries is affected, which in turn can affect global economic growth. Second, changes in currency exchange rates are very relevant in a global context. Rising interest rates often lead to currency strengthening. For example, if the Federal Reserve raises interest rates, the US dollar tends to strengthen. Developing country currencies can depreciate in response to a strengthening dollar, making dollar-denominated debt more expensive. This risks causing a debt crisis in several countries that are highly dependent on debt in foreign currency. Furthermore, the impact on inflation must also be considered. An increase in interest rates is usually aimed at reducing inflation. However, this can be a double-edged sword; while its goal of controlling inflation is achieved, on the other hand, if economic growth slows down, this could lead to deflation in the long run. Slow growth can result in companies reducing production, which in turn can cause unemployment to rise. Having a direct impact on the housing sector, rising interest rates can hinder credit accessibility. This causes a decrease in demand for mortgages, which leads to a decrease in property prices. The real estate market showing signs of decline could have a ripple effect on the construction sector and labor market. Apart from that, the financial sector is also affected. Banks tend to increase loan interest rates which can lead to a decrease in credit demand. Small businesses may be forced to delay expansion or new investments as a result. As borrowing costs for businesses increase, consumer purchasing power may also be affected, which in turn impacts consumption. Rising interest rates also have an impact on global stock markets. Investors tend to shift assets from stocks to bonds when interest rates increase, because bonds offer more attractive returns. A decrease in interest in shares can suppress share prices, impact the value of investors’ wealth, and reduce market sentiment. While the short-term impact of rising interest rates may feel more drastic, the long-term impact remains a concern. Tight monetary policy can hinder innovation, investment and sustainable growth. Therefore, stakeholders in global markets must closely monitor changes in interest rates to navigate emerging challenges and opportunities in a volatile economic era.