eli5: who or what is profiting from the MASSIVE interest rate rises in Australia? Is it the banks holding your mortgage? The Government?!.. basically, who is loving life right now?
In: 34
If the rate rises successfully curb inflation, then the beneficiaries are the general consuming public.
Businesses, broadly speaking, don’t like high interest rates. It increases borrowing costs and reduce investments. Investors don’t like interest rate increases because it generally reduces share prices.
Banks are in the middle. They might make more on loans but it is offset by reduced lending. On balance, it probably hurts them as well.
Interest rate hikes are unpopular so it is rather unlikely the government or politicians are doing this for their immediate political benefit. On the other hand, high inflation is worse in the medium term for the government, the economy and the general welfare of the citizens.
Bottom line, interest rate hikes are a bit like a bitter medicine that no one really likes but is probably necessary to stem inflation.
Latest Answers