What happens to interest rates in a recession?
It depends on where interest rates were/are at the start of the recession. A recession is classified as 2 successive negative quarters of negative economic growth. …So the government needs to promote growth by encouraging people to spend. By lowering interest rates, people don’t need to spend as much on their loans – and can instead spend money in the economy. Of course the impact of inflation also needs to be taken into account. Thus if a country is experiencing high inflation, governments may be reluctant to lower interest rates.
