When facing a potential recession, financial decisions take on a new weight. After all, financial policy may change during a recession, which can leave consumers with questions. For example, if the Federal Reserve lowers interest rates, should you borrow money during a recession?
In the U.S., the National Bureau of Economic Research defines a recession as more than a few months of significant decline across different sectors of the economy. We see this decline in changes to the gross domestic product, unemployment rates, and incomes.
How Does Financial Policy Change During a Recession?
The Federal Reserve, which controls monetary policy in the U.S., often takes steps to attempt to curb unemployment and stabilize prices during a recession.
It may be harder to find a bank willing to lend during a recession
Lower interest rates may mean that a bank or lending institution isn’t able to make as much money from loans. This may make lending institutions more hesitant.