|
Adam Sheikh, Kenya
|
Effect of Interest Rate Raise on Economic Growth
How far can a increase/decrease in interest rate contribute to the global economic growth?
X
Sign up for free
Welcome to the Finance and Investing forum of 12manage.
Here we exchange knowledge and experiences in the field of Finance and Investing.
❗Sign up now to gain access to 12manage. Completely free.
X
Continue for free
Please sign up and login to continue reading.
Here we exchange knowledge and experiences in the field of Finance and Investing.
❗Sign up now to gain access to 12manage. Completely free.
| |
|
|
| |
|
venkataramanan
Financial Consultant, United States
|
|
Consequences of an Interest Rate Raise / Cut on Economic Growth An increase in interest leads to an increase / mobilization of savings( i.e., capital formation).
If interest rates are not so attractive, more money will be invested, resulting in an increase in production → more goods → more employment → economic growth.
|
| |
|
Onyango Lucius, Uganda
|
|
Effects of Interest Rate Raise on Economy The problem with raising the interest rate is that the economy will hold on to their money instead of investing it.
Investors may even wait for another raise in the interest rate which might take a long period. This will affect the economic growth negatively.
|
| |
|
Jaap de Jonge
Editor, Netherlands
|
|
Effect of Interest Rate Raise on Economic Recovery/Growth I agree a raise of the interest rate normally has a negative effect on the economy, slowing down growth. Because it makes it relatively more interesting for people who have money to put it on some savings account (bank) instead of investing it (in shares/stock). Investments in shares then allow companies to invest and grow, which then stimulates the economy.
@Onyango Lucius I agree that certain investors may even anticipate further future interest rates increases, so they would keep their money at hand in case that happens.
|
| |
|
sanjeeb mohanty
Student (MBA), India
|
|
Relation Between Interest Rate and Economic Growth When there is an interest rate increase, there will also be a consequential rise in the prime lending rate for banks (to companies) which may adversely affect the credit off take and so capital formation in businesses will be affected negatively.
This also supports the notion that economy growth will diminish.
|
|
|
|
|
More on Finance and Investing
|
|
|
Log in
Comments by date▼