The Effects of Raising Rates on Lending

When the Fed raises rates, there's less demand for loans because people are facing in a higher borrowing cost. That is a problem of lowering rates is that it makes lending very unprofitable. So if we do things slowly, so that the market can adjust and there's no crash, I think the borrowing channel becomes more important. But if we crash, though, that kind of changes everything because market crashes really affect sentiment. Well, that really hurts the economy a lot. It's very, very deflationary.