What is the primary effect of increasing interest rates on consumer spending?

When interest rates increase, borrowing money becomes more expensive. This means that loans for things like cars or houses will have higher monthly payments, making people think twice before making big purchases. As a result, many consumers may decide to spend less on non-essential items, leading to a decrease in overall consumer spending. For example, if someone was planning to buy a new car but sees that the interest rate on their loan has gone up, they might choose to wait or buy a less expensive vehicle instead. This reduced spending can slow down the economy since businesses may earn less and could even lead to job cuts.