Drag on Economic Growth
Higher rates are often a drag on U.S. economic growth because they translate into higher costs for companies that need to borrow to finance their growth — a common strategy for most companies.
Higher costs and lower profits mean slower economic growth for the nation as a whole. If conditions are severe enough, this can result in an economic recession. In a recession, many companies have to lay off workers to cut costs, and this can fuel a vicious cycle of higher unemployment and lower consumer spending, which further dampens economic growth.
