> For example, when interest rates go down, it becomes cheaper to borrow, so households are more willing to buy goods and services, and businesses are in a better position to purchase items to expand their businesses, such as property and equipment. Businesses can also hire more workers, influencing employment. And the stronger demand for goods and services may push wages and other costs higher, influencing inflation.
My layman’s understanding is that near zero interest rates make borrowing nearly free and so investments like lots of headcount are rational. The companies don’t have to be doing the borrowing directly (though some do), they can simply benefit from investors willing to tolerate more risk since they have fewer “safe returns” as options, or more income from consumers who are willing to spend at low interest rates.
By lowering interest rates to the point people chased ever more expansive and risky investments. If all your competition is getting free money you as a business must generally take it too or extinguish to your over-capitalized competition. People also have more loose money which means if you can't up your production your customers will find alternatives and your business will dry up.
> For example, when interest rates go down, it becomes cheaper to borrow, so households are more willing to buy goods and services, and businesses are in a better position to purchase items to expand their businesses, such as property and equipment. Businesses can also hire more workers, influencing employment. And the stronger demand for goods and services may push wages and other costs higher, influencing inflation.