<p>Fixed interest rates, a fundamental concept in macroeconomics, refer to interest rates that remain constant over the life of a loan or investment. Unlike variable interest rates, which fluctuate with market conditions, fixed rates provide borrowers and investors with predictable financial planning.</p>

<h2>How It Works</h2>
<p>Fixed interest rates are typically applied to loans and bonds. Here's how they function:</p>
<ul>
  <li><strong>Loans:</strong> When a borrower takes out a loan with a fixed interest rate, the interest rate remains the same throughout the loan's term. This means the borrower knows exactly how much they will pay each period, providing stability in their financial planning.</li>
  <li><strong>Bonds:</strong> In the case of bonds, the issuer agrees to pay a fixed interest rate, known as the coupon rate, to the bondholder until the bond matures. The bond's price may fluctuate with market conditions, but the interest payments remain constant.</li>
</ul>

<h2>Why It Matters</h2>
<p>Fixed interest rates matter for several reasons:</p>
<ul>
  <li><strong>Predictability:</strong> They allow borrowers and investors to plan their finances more accurately, as they know exactly what they will earn or pay over the life of the loan or investment.</li>
  <li><strong>Risk Mitigation:</strong> For borrowers, fixed rates protect against rising interest rates. For investors, they provide a steady income stream, reducing the risk of fluctuating returns.</li>
  <li><strong>Monetary Policy:</strong> Central banks use interest rates as a tool to influence economic activity. Fixed rates can impact the effectiveness of monetary policy, as they do not adjust with changes in the policy rate.</li>
</ul>