Boosting Business Investment
Businesses can invest their excess cash in interest-bearing accounts to make more money. During periods of high interest rates, businesses earn more from these investments. When rates are low, businesses may be more likely to use their cash for new equipment and plant improvements. While this can be good for equipment sellers and construction firms, banks lose out. Banks make their money from providing loans. When they don't get business investments to boost their assets, they can't make as much money because they have less to loan out.