will interest rates go up during a recession?

Answer 1

no not usually when there is a recession to stimulate the economy the fed will lower interest rates to induce companies and individuals to invest in the economy. When the fed sees that there is enough flow of cash in the economy then it will begin to raise rates to reduce inflation

Answer 2

Generally speaking, interest rates go down during a recession. The Federal Reserve has the most influence on interest rates. Its goal is to control inflation and economic growth. If the economy is growing "too fast" (in other words, inflation is starting to rise), as it did during the Internet bubble, the Fed will raise interest rates to limit economic growth and inflation - often causing a recession. This happened in the early 1980s with Paul Volcker, who choked off 13% annual inflation by raising interest rates and reducing the money supply, intentionally creating the worst recession since the Great Depression.

Incidentally, most economists agree that, in the long run, inflation is deadlier to an economy than unemployment and recession.

In general, therefore, interest rates go up before a recession. During most recessions, assuming the Fed is run by a smart economist, the Fed will lower interest rates to stimulate business investment and consumer spending (as it did just after the Internet bubble burst).

Eventually, the economy will start growing "too fast," creating inflationary pressures, so the Fed will raise interest rates again to stop inflation before it even happens (something it's been doing for the past two years).

And the business cycle starts over again.

In the current market, long-term interest rates are at a 30-year low, as are mortgages. However, it's likely that mortgages will drop even further, as fewer people buy houses and take out mortgages. It's even likely that the Fed will start cutting interest rates and increasing the money supply in the first half of next year, to create what's called a "soft landing" instead of a recession.

Answer 3

During a recession interest rate in general will tend to decline. This is due to the government trying to stimulate growth through easy access to money, See Japan's interest rates over the past decade.

Answer 4

Since there is a recession, it can be assumed that the demand for money is low. Hence the possibility of interest rates going northwards seems difficult.

Moreover, people behave in conscious way, that is, there is less supply of money into markets (like less of Fixed Deposits with banks). Maybe if the situation is really bad, people might not put their money in an ordinary Savings Account for the fear of bank going bust. So interest rates won't go up.

However as recessionary trends start to dispel, banks try to lure customers to part with their money with higher interest rates.

Answer 5

Not with this fed. Interest rates have to be dropped in recessions to avoid depression according to current fed philosophy. This is why they have loaded their gun by raising so aggressively of late. They need something to work with and they know another recession will come.