anticipating that the rates will continue rising, wont this change have negative effects as the market will try borrowing more money now instead of in future, which is opposite the purpose of increasing rates to tighten monetary policy?



then rates will continue rising, then anticipating that trend, market will borrow more now.


What a dead lock!



What is your opinion?

Please feel free to discuss

if i've got a project, the rate of return is 8%, but if my borrowing cost is gonna go up to 7%, it simply does not reward my risk, in which case I will not borrow.

What you presented is more like a mortgage case where one plans to buy a house in the near future. So it depends on which impact is greater.

But on the other hand, from a saver's point of view, more people will save instead of invest, which will cool the ecomony.

it's really a matter of leverage.

when rates increase, consumer spending will reduce (esp housing). one reason fed increase rate is to prevent the property bubble. back to topic. when spending reduced, the economy is going to slow down. so corporate faces two obstacles when they want to borrow: higher interest cost and slower sale growth. in this case, most corporate will slow expansion and lower the loan rather than borrow loans.

this is the classic economic view...