Maybe Mass isn't heading for a recession after all?
Larry Edelman, business reporter for the Boston Globe recently wrote an article in his weekly newsletter opining that perhaps the news isn't all bad for the New England economy.He did a deep dive into the Fed's "Beige Book", which details housing and employment info and found nothing but stability. Retail prices rose modestly, retail sales were steady, commercial real estate was unchanged. The outlook, per the Fed, was "mostly positive". The one note of caution was on lending. There are worries that banks in New England will curtail lending after what happened in Silicon Valley and Switzerland. The market did take a pause in Q1 2023 as lending abated.
Will the Fed Raise Interest Rates Yet Again?
The New York Times has admitted the US economy is in a recession and reporter Jeanna Smialek asks if the Fed will take steps to prevent what she calls a "slight recession" from turning into a big one.Inflation is high - as consumers well know - and the Fed has usually dealt with that by raising interest rates on loans, thus making it more expensive for already-stretched consumers to take out loans for houses, cars, or businesses. This results in less wage growth and increased unemployment and less consumer spending. Seems counterintuitive, right?The idea is that a slower economy will bring inflation under control (as shoppers stop shopping, sellers lower prices, so the idea goes). But the price increases we've been dealing with since 2021 are now driven by services - i.e. wages - and not by material goods. That's a lot harder to curb, as wage cuts are impossible to institute.Banks are failing, largely because they didn't have the capacity to deal with higher interest rates making their older holdings worth less. So will other banks fail if the Fed raises rates? And if so, what kind of chain reaction might that set off?See what the Fed decides this afternoon.