June 20, 2022
BU Today recently published an article featuring insights from Jay Zagorsky, Senior Lecturer of Markets, Public Policy, and Law, exploring the economic implications of rising interest rates and declining stocks.
This month, the Federal Reserve revealed they increased interest rates in the highest price hike the country has seen in over three decades. Their goal is to reduce inflation without causing a recession. However, there is a possibility that this could cause economic burdens. Jay supports this theory, commenting,
“When humans are faced with a difficult task, they prepare by practicing many times. This is why athletes train for years, professors write out and then revise lectures, or politicians try out new ideas on small, friendly audiences before taking the ideas to a bigger stage.”
The Fed, however, doesn’t have the advantage of practicing this task multiple times, making it difficult for them to achieve their goal of reducing inflation. Additionally, those seeking loans and mortgages will likely experience more barriers and pay costlier debts as the economy slows. As a result, the economy will not begin to stabilize until the Fed stops raising interest rates.