1. Stimulate economic growth: Lowering the loan interest rate will encourage enterprises and individuals to borrow, thus increasing investment and consumption. This will help to promote economic growth, increase employment opportunities and improve income and living standards.
2. Reduce the debt burden: For enterprises and individuals who are already burdened with loans, lowering interest rates will reduce their interest expenses, thus reducing the debt burden. This will help improve the financial situation of enterprises and individuals, so that they can better cope with economic challenges.
3. Affect the money supply and liquidity: Lower interest rates usually lead to an increase in the money supply, because lower interest rates will stimulate loans and investment. This may lead to more abundant funds in the market, thus improving liquidity.
4. Impact on the capital market: Lower interest rates usually lead to higher bond prices, because lower interest rates will make interest payments on existing bonds more attractive. In addition, lower interest rates may also lead to the rise of the stock market, because lower interest rates usually stimulate the investment and expansion of enterprises, thus improving the company's profit prospects.
5. Affect the exchange rate: Lower interest rates may lead to the depreciation of the domestic currency, because it will make the domestic assets less attractive. This may have a positive impact on exports, because domestic goods become cheaper in overseas markets, thus improving competitiveness.
It should be noted that interest rate cuts are a double-edged sword. If overused, it may lead to inflation, asset bubbles and other problems. Therefore, policy makers need to carefully weigh the stimulating effect of interest rate cuts on the economy and the potential risks.