What happens when interest rates increase?
- November 9, 2022
- Eric Swanson, economics, LinkedIn News, Nov. 9, 2022
The main purpose of raising interest rates is to discourage spending. Many consumers respond to higher interest rates by waiting until they decrease to make major purchases. “During the pandemic, [the Fed] lowered interest rates to give the economy a boost, and now that the economy's kind of going too strong — as evidenced by the inflation — they're trying to slow the economy down by raising interest rates,” said Eric Swanson, an economics professor at the University of California, Irvine.
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