After the U.S. and Central Massachusetts got through the initial phases of the COVID pandemic, the economy was largely strong by traditional standards, with low unemployment and GDP growth. Yet, due to rapid inflation and the lingering effects of the COVID pandemic, the economy just wasn’t working for everybody.
Let’s face it, the economy has been funky for the last four years.
WBJ Editor Brad Kane
After the U.S. and Central Massachusetts got through the initial phases of the COVID pandemic, the economy was largely strong by traditional standards, with low unemployment and GDP growth.
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Yet, due to rapid inflation and the lingering effects of the COVID pandemic, the economy just wasn’t working for everybody.
In order to address the most pressing problem – inflation – the Federal Reserve began rapidly raising interest rates in March 2022.
By raising rates, the Fed essentially was trying to slow the economy down and dampen business growth. Such a move typically throws the economy into a recession, but the Fed appears very close to pulling off a rare soft landing: slowing inflation without a recession.
Still, even as price hikes slowed, the economy still felt off.
Unemployment was ticking upward, and the dynamism of the country’s slow but steady growth that characterized 2009-2019 was gone.
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Feeling inflation is close to under control, the Fed on Sept. 18 began lowering interest rates. This might be the turning point in the post-COVID economy.
As Staff Writer Eric Casey details in his story “Falling interest rates” in the Focus on Banking & Finance, the full impact of the Fed’s decision is a boost for businesses, even if it won’t be felt for some time.
Business borrowing will tick up, and mortgages will be slightly cheaper; but this won’t be an immediate switch to a thriving economy that works for everybody (if such a thing even exists).
The switch being thrown, though, is a shift in mentality. Instead of trying to slow the economy, the Fed is trying to grow it. This will have trickle-down effects in Central Massachusetts.
Businesses have better opportunities to grow. Buyers, clients, and suppliers eventually will have more money to spend. This isn’t a cure-all, and the Fed might not get rates down to pre-2022 levels for years, if not decades.
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Still, it is a step in the right direction.
Brad Kane is the editor of Worcester Business Journal.
