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IIRC, high interest rates are caused by an economic boom, as raising interest rates is caused by both an increase in demand for cash flows to finance investment

IIRC, high interest rates are caused by an economic boom, as raising interest rates is caused by both an increase in demand for cash flows to finance investments and also as a monetary policy to put economic pressure to control inflation. Currently the world in general is very far from an economic boom, and central banks are actually implementing desperate monetary policies to jump start inflation. Thus, we are very far from those times to the point that nowadays a 3% interest rate is considered huge, as the norm is for interest rates to remain below the inflation rate

deleted 8y ago
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pembrook 8y ago
3% is not huge for the US right now (we have been the most aggressive of the developed markets in normalizing). 3% is only a bit above the federal funds rate right now. When you account for the investor cash that will subsidize this service as a loss leader offering, it’s not unreasonable. The only risk is we enter a severe recession and the fed has to drop interest rates to 0 again. In that scenario, robinhood simply has to lower the rate of their offering as well. This isn’t some big existential risk.