One of the biggest benefits of reducing interest rates is creating a favorable environment for lending. With low interest rates, borrowing money becomes easier and the value of money becomes higher. This has boosted the demand for loans from businesses and individuals, creating conditions for them to invest in new projects and develop their businesses.
The next benefit of reducing interest rates is to create incentives for consumption. With low interest rates, borrowing to buy a house, buy a car or consume goods and services becomes more attractive. People can save a lot of money from paying interest and use this money to consume more. This could create a positive growth in the retail and service industry.
The best time to borrow money in many years.
However, reducing interest rates also carries some risks. One of them is the risk of creating inflation. When interest rates fall, borrowing becomes easier and more cash enters the market. This can lead to rapid growth of the amount of money in the economy, causing inflation and a decrease in the value of the currency.
Besides, reducing interest rates can also affect the financial resources of banks. With low interest rates, banks will earn less income from lending and investing. This may impact their ability to provide services and financial support to customers.
The 11.7% interest deposit that Ms. Huong deposited at the end of last year matures at the end of this month with a new interest rate of only 5.7% per year. Photo: vnexpress.net
The deep reduction in bank interest rates in 2023 has created significant changes in the economy and financial markets. Although there are certain benefits such as facilitating lending and encouraging consumption, there are also risks such as the risk of inflation and impact on banks' financial resources. Careful management and careful consideration are necessary to ensure stability and sustainable development of the economy in the coming time.
Hopefully 2024 will be a year of economic prosperity, strong growth and prosperity.