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
Banks make money *on the difference* between the rate they borrow at (cost-of-funds) — from savings accounts, CDs, other banks — and the rate they charge. When their cost-of-funds rate goes down it does so for *all* of the other lenders out there. It’s a competitive market so they have to lower their lending rate.
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