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Mar 31, 2018

Why we need lower interest rates

For as long as I can remember there has been a struggle for lower interest rates. This struggle has been mostly propagated from the business and commercial industries. It is the same story in all parts of the world. Businesses are constantly looking for ways to compel the governments to approve lower interest rates. Do we need interest rates to be lower?

There are very many opinions on this issue, and they might make sense but what are the immediate gains of a lower interest rate?

Lower prices in the markets

One of the reasons for high market prices is that companies have included the higher fees they will pay as interest on the loans they have invested in the business. But if the interest rates are lower, there will be a reduction in the prices of goods and services.

Thriving economy

Lower interest rates will encourage more companies to borrow, and this means more funding for other businesses, which they have planned as part of their expansion.

Funding for startups

Startups can now borrow funds from banks to launch their businesses. High-interest rates usually scare away startups because these activities might not yield profits during the growth period.

However, some opinions have been made public about lower interest rates. The critics claim that the fact that it encourages borrowing increases the debt profile of businesses, which is a big risk. In the event of an unexpected collapse, the money will be lost. They also claim that many businesses that borrow funds have not created an adequate financial plan to manage these funds and they end up becoming critically indebted to the banks.

Overall, it is good for the interest rates to be minimal; the high-interest rates earned by the banks and government is barely used to benefit the public. The focus should rather be on helping businesses to maximize these loans.

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