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
The interest rate you pay is always going to be a little higher than the interest rate the bank pays to borrow money, they need to make money to cover costs and defaults. The bank borrows money from depositors and other banks and has to pay them interest. In general a bank will maintain the same profit margin between loans they give out and the rate they borrow at.
If you get really into the details banks do tend to make more money when interest rates are higher, either through paying less interest to depositors or charging slightly higher rates on loans.
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