Re:Fed cuts half point in emergency move amid spreading virus
by nybble41 on Friday March 06, 2020 @11:04AM
(#22504628)
> You can only afford to raise rates for lending if you've got something better to do with the money.
A borrower can only afford to pay higher rates if they have something better to do with the money. Lenders can always afford to raise rates, as doing so increases their profit margin. The limiting factor there is competition from other lenders, but a factor like inflation affects all lenders equally. What they can't afford is lower profits in real, fixed-dollar terms due to inflation. Lower profits on lending => less money available for lending => higher prices (interest rates) for the remaining supply.
No, because the reason you lower interest rate targets are exactly the conditions which provide lower returns on alternative investments besides lending. You can only afford to raise rates for lending if you've got something better to do with the money.