If Interest rates just mean the bank are making more profit back doesn’t that mean they want them to be as high as possible? What incentivises them to reduce rates and make less money?
In: Economics
Generally the cycle is driven by rates set by central banks and because central bank is „bank for banks”, those rates are passed on to individual and company clients.
When rates are increased, this is contractionary monetary action (basically everything on credit is more expensive, so for mere mortals key thing is mortgage rates. If it’s more expensive, you expect less activity). High rate environments are usually considered to have less liquidity in the market.
On the other hand, you have expansionary monetary policy, primarily linked to decreasing interest rates. Stuff is cheaper on credit, so people are more keen to buy.
Above is very simplified, but gives you a bit background.
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