The Objectives of the Prohibition of Riba By: Elhadi Habbani

Thanks dear Ibrahim for your valuable commentary.

Inflation and interest rates have an inverse link. Inflation refers to the rate at which prices for goods and services rises. Interest rate refers to the amount of interest paid by a borrower to a lender which represents the risk free rate plus compounding of different other risks premiums and sometimes the local Central Bank regulates and fixes interest rate. In general based on the rule that inflation and interest rates have an inverse relationship, as interest rates are lowered, more people are able to borrow more money so consumers have more money to spend, causing the economy to grow and inflation to increase. The contrary remains true for rising interest rates. As interest rates are increased, consumers tend to have less money to spend. So, less spending, the economy brakes and inflation decreases.
I agree with you in genearal that credit cards nowadays attract consumers to consume more but it can not continue pushing infation rate to higher levels unless it came with very low interest rate.

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