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Fed Action Could Mean Central Mass Business Boost

Saturday, September 15, 2012

 

Local experts say the region could see a boost in several key sectors after the Federal Reserve announced its newest stimulus initiative on Thursday.

In order to spur on the economic recovery, the Fed will buy up $40 billion of mortgage-backed securities each month and will keep interest rates at near-zero levels well into 2015.

Local Economist Weighs In

The initiative is the third installment of the practice known as quantitative easing, or QE3, and is the latest in a series of unprecedented measures by the Fed to jumpstart the economy in the past four years.

"This is something that is new to the Fed, so this is unexplored territory for them," said Victor Matheson, an associate professor of Economics at Holy Cross.

"My sense is that it is likely to have some small positive effect, but the downside risk is extremely small."

The main concern among critics of quantitative easing is that the Fed's actions will cause increased inflation.

However, said Matheson, inflation over the past five years has actually been below the 2 percent annually that officials aim for, and the fears of skyrocketing inflation after the rollout of QE3 are likely overblown.

According to Matheson, the real action will be in industries that rely on the sale of goods and services on credit, such as home and auto sales, where the ultra-low interest rates may encourage consumers and businesses to make larger purchases and investments they may have been putting off.

Small Businesses Need Customers

Bill Vernon, the Massachusetts state director for the National Federation of Independent Business, said the announcement's positive effect on the stock market, which surged after the plans for QE3 became public, may spur buying in the Bay State as consumers begin to feel wealthier, which would be good news for the members of his organization.

"The problem for small businesses is the lack of customers," he explained.

"On the lowering of interest rates, I'm a little more skeptical that that's going to have a positive impact."

A Little More Help for the Housing Market

Yet for Diane DeCiccio, president of the Worcester Regional Association of Realtors, the new action by the Fed will only add to the momentum she has already seen picking up in the Central Mass housing market.

"It's a great thing because that means there is a lot of buzz," she said.

"Consumer confidence is really at an all-time high for the last few years."

By making borrowing cheaper, DeCiccio said, the Fed is definitely goign to help encourage homeowners to refinance their current loans or take out new ones in order to upgrade to larger or newer homes.

The fact that new home construction seems to be on the rise as well doesn't hurt.

"It's so refreshing to see new houses going up again because it's been years." 

 

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Comments:

Iron Mike Farquhar

You're kidding me right?

When in the history of modern paper-money economies has the printing of worthless paper money EVER made ANY country's economic woes any better?

Keeping interest rates near ZERO is gruesome for retired people who had saved all their working lives and planned to live on their investments.

AND, it causes people to borrow thinking the rates will STAY low. When they do go up, you get another cycle of failing businesses and foreclosed homes.

Better go talk to some wiser 'experts'.

Edward Saucier

Iron Mike should go back to Economics 101. Give me some of that worthless paper money and I'll find a use for it. And who says all retired people rely on high interest rate investments to live on? People don't borrow money just because the interest rates are low they borrow money because the need it for something.

And don't forget that "the markets" sure liked that Fed action as the Dow 30 & S&P 500 are closing in on their Oct. 2007 highs.

The smart money says Iron Mike can't even fill out his own income tax returns.

Stephen Quist

I will place my bet with the smart money - Boots I think you nailed it.
The stimulis is a needed boost to the housing market and stablization of the markets.
Kinda of funny that rusty mike believes ALL retired people live on their investments.....maybe if they hang and run in the IHOP'er flip-flopping mitty romneys circles but not average Americans.....

Iron Mike Farquhar

How perfectly fitting that the last two commenters – Messrs. Saucier and Quist – BOTH display a liberal elitism toward both retired folks and basic economics.

>> “the smart money says Iron Mike can't even...”

>> “hand and run in the IHOP'er ….circles...”

Sheer arrogance 'Gentlemen' – sheer arrogance. And neither of you answered my basic question:

When in the history of modern paper-money economies has the printing of worthless paper money EVER made ANY country's economic woes any better?

WHO, WHEN, and HOW do either of you expect our $16 TRILLION national debt to be repaid?

Stephen Quist

How perfectly fitting that the extremist teapartier neo-con rusty mike lapping up neo-conservative mantra........enjoy it rusty.....after November 6 you can enjoy and revel in 4 more years of belly aching with Obama......
There was a deal on the table by Obama to cut the deficit by 25% but the republiCant leader in the house could not close the deal with his extremist members.....
The republiCants even rejected a bipartisian panel to lower the deficit.
So it is clear as day that it will not be republiCants closing the deficit and seeing as it was they that ran up the deficit during their 8 years in the Oval office electing another republiCant to lead the Whitehouse is a non-starter.....

Edward Saucier

The Treasury Dept. prints money to replace old money and it's not worthless. The Federal Reserve Bank sells bonds to other people and countries which creates our national debt. One of the big reasons we have such a large National Dept. is our propensity to create wars by invading nations on a whim. War is a racket and billions of dollars went missing in Iraq, poof, no one knows where it went. Many of U.S. corporations felt the need to screw the American people by moving to communist China which is the type of government we lost the lives of millions of troops trying to overcome. The banks don't want to give money to borrowers because the interest rates are too low. Maybe we need a Bank of the US, run by the government? The greediest of the greedy don't want to pay income tax. Change that stuff and we will make a good start to make a dent in the national debt. FDR made a good deal for the economy after the republicans tanked it. Bill Clinton passed on a budget surplus to Bush which he quickly turned into a deficit and then tanked the economy again. All the republican presidents since Ronald Reagan did their best to tank the economy and nitwits like Ironbrain Mike blame it on worthless printed money. And he calls us ignorant "Q"? How stupid ca none guy get.

Now does that answer your question Mikey? Now answer mine, can you fill our your own income tax returns?

Edward Saucier

Paul Krugman gave a good positive report on that Fed Action in yesterdays NY Times Op-Ed section. He sure did come down hard on the republicans too. I love Paul Krugman. GOOGLE; Hating on Ben Bernanke - NYTimes.com

Those with Stockholm Syndrome, don't bother, you people wouldn't understand.




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