Why do rising interest rates during a crisis make it harder for businesses and consumers to borrow money?
Answer (1)
Rising interest rates make loans more expensive. When banks raise their interest rates, both businesses and consumers have to pay more in monthly payments for things like capital, equipment, houses, or cars. During a financial crisis, this discourages borrowing and spending, which slows down the economy even more. Businesses may cancel plans to expand or hire, while families may delay buying a home or starting a small business. This is why central banks like the BSP are careful in adjusting rates during crises—they must balance controlling inflation with keeping the economy active.
