What primarily influences the changes in interest rates in the economy?

The primary influence on changes in interest rates in the economy is the monetary policy set by the Federal Reserve. The Federal Reserve, as the central bank of the United States, has the authority to adjust interest rates in response to economic conditions. When the Federal Reserve raises or lowers the federal funds rate, it directly affects the cost of borrowing money and the interest rates that consumers and businesses face for loans and credit.

Monetary policy is designed to manage inflation, maximize employment, and stabilize prices, and these goals can necessitate adjustments to interest rates. For example, in an effort to spur economic growth, the Fed might lower interest rates, making borrowing cheaper. Conversely, if inflation is rising rapidly, the Fed may increase interest rates to slow down economic activity.

In this context, while consumer behavior, government regulations, and international trade agreements can all have impacts on the economy, it is ultimately the Federal Reserve's monetary policy that plays the most decisive role in directly influencing interest rates.