It is widely assumed that investment will increase if interest rates are lowered. But what if that isn't true?
Here's a graph of corporate investment versus interest rates, and I don't see an inverse correlation. Instead there is a strong direct correlation. Lower interest rates are correlated with lower investment.
Maybe investment as a percentage of profit is a bad measure because a high level of investment will lower contemporaneous corporate income. But when we measure investment as a percent of GDP we see a similar cycle (below). In fact higher investment rate isn't correlated with lower interest rates but with higher profits, at least until recently.
Corporate profits are at all time highs, so why is the investment rate at levels historically associated with recessions? Probably because recent profits aren't generally created by corporations selling so much, but that their labor, interest, and tax expenses are relatively low. It makes sense to invest more because your sales are higher, not because your costs are lower. That seems obvious, but sometimes the obvious is obscured by ideology.
Why are high interest rates associated with high investment rates? And by the way, this correlation is true of real or nominal rates, and short or long term rates. Until the past 4-years of quantitative easing, banks historically had limited deposit reserves in the short run, so higher demand for borrowing to fund consumption and investments would drive up interest rates. Which is to say that US interest rates tend to reflect the supply and demand of money more than idiocyncratic behavior of the Federal Reserve.
High interest rates are correlated with high investment rates, but they don't cause them (if anything the inverse is true). Therefore in spite of the graph, central banks really shouldn't raise interest rates to stimulate the economy. On the other hand, lowering interest rates below market clearing rates isn't all it is cracked up to be, though it can marginally increase household disposable income by reducing mortgage payments. That also explains why QE, despite all its hype, hasn't been that effective.
If the Fed really wanted to spur consumer demand, which would thereby increase investment, they should buy so much credit card debt that it makes their interest rates significantly lower than expected credit losses. But that's not politically acceptable on a several levels. So monteary policy does what it can to improve the economy and fiscal policy does what it can to impair the economy.