Effects of increasing interest rates on Banks
The profitability of the bank will increase with the increase in interest rate because it will directly yield cash, and the profits will be directed to the earnings (Mueller). Since the hike in interest rates occur in environments with strong economic growth and the bond yields are rising, the banking sector will experience a profit increase. Therefore, most consumers will demand loan spikes; hence, increasing the earnings for the banks. For instance, if a client has $ 2 million in his account, he will earn 1% interest, and the bank makes 2% on this money in the short run. Consequently, ...
