Imagine borrowing a book from a friend, and when returning it, you give them one more book as a thank you. In the world of finance, that extra book is similar to interest. Interest rates are the cost of borrowing money. Central banks, like the Federal Reserve in the U.S., set the benchmark interest rate, influencing loans' costs for everything from houses to business expansions. These rates help manage economic growth and inflation, acting as a throttle or brake on the economy's speed.