The Federal Reserve is signaling that interest rates will remain near 0 through 2023 in an attempt to help the US economy recover from the ravages of COVID-19.
This is good news for real estate but can also lead to stock bubbles. According to the Denver Post:
The Fed’s benchmark interest rate influences borrowing costs for homebuyers, credit card users, and businesses. Fed policymakers hope an extended period of low interest rates will encourage more borrowing and spending, though their new policy also carries risks of inflating stock or causing other financial market bubbles.
The chairman of the Federal Reserve, Jerome Powell, suggested that interest rates would remain low until the labor market firmed up and inflation exceeded 2% for an extended time.
The Fed has revised its estimate of unemployment by years end from 9-10% in June to 7-8% now. This is good news and indicates the resilience of the US economy in spite of the COVID measures.
But some small businesses won’t recover from COVID. According to The Hill, overall, as of July 10, 26,160 restaurants closed in the U.S., an increase of 2,179 since June 15. And over 60% of restaurants that closed down due to lockdowns will never reopen:
New economic data released Wednesday by business review website Yelp shows that approximately 60 percent of restaurants that had to shut down during the pandemic have permanently closed their doors.
Hopefully, the policies the Federal Reserve is pursuing will help the US economy get back to normal.