What happens to durable goods consumption when interest rates rise?
Answer (1)
Durable goods consumption usually goes down when interest rates go up. This is because most Filipinos buy expensive items like motorcycles, TVs, or computers through installment loans or using credit cards. If the interest rate is high, then the monthly payments also become more expensive. For example, if a young professional in Cebu wants to buy a laptop on installment but the bank’s interest rate increases, the total amount she needs to pay every month may rise, making her postpone or cancel the purchase. High interest rates discourage borrowing, which reduces consumption of durable goods.
