On August 7th, Dr. Karen Spohn, an Associate Professor of Economics and Finance in the Division of Business and Security Studies at Rivier University, addressed the Rotary Club of Nashua regarding Economic Outlook and The Federal Reserve. She earned her Ph.D. in Economics with a concentration in Finance from the University of Delaware. Dr. Spohn has over 20 years of teaching experience in higher education institutions including Marietta College, Ohio University, and the University of Massachusetts Lowell. In 2013, she was named the Business Educator of the Year at the New Hampshire Excellence in Education Awards. Her current research focus is ESG Reporting and sustainable investing.
Prior to academia, Karen worked as an economist and regional economic forecaster at the corporate headquarters of the WEFA Group in Bala Cynwyd, PA. She served as Program Manager of Research and Development at Ohio University’s Institute for Local Government Administration and Rural Development (ILGARD) and Assistant Director of the Small Business Innovation Research (SBIR) Assistance Center of Southeastern Ohio.
Her presentation will cover the Federal Reserve, Economic Policy, Inflation and Research. There are many factors that may affect our monetary policies. Inflation expectations, the element of time and central bank regime change. Inflation indicators include Forecasters, Business Leaders and Consumer Expectations. In a normal situation, everything is in balance and inflation is static. When things go wrong, the most affected are households.
There are three categories of inflation, Long Term, Short Term and Actual. In 2012, the target interest rate was 2%. In 2020, the term was changed to “average around 2%. The interest rate in July of 2023 was 5.25%. Economists are looking for more permanent inflation between 2-5%.
What causes inflation? Aggregate Demand Increases. Aggregate demand is a measurement of the total amount of demand for all finished goods and services produced in an economy. Aggregate demand is commonly expressed as the total amount of money exchanged for those goods and services at a specific price level and point in time.
Aggregate Supply Increases. Aggregate supply, also known as total output, is the total supply of goods and services produced within an economy at a given overall price in a given period. It is represented by the aggregate supply curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Typically, there is a positive relationship between aggregate supply and the price level.
Economists expect within the next 1-3 years there will be a slowing of the US economy. The possible risks or “Headwinds” include Debt Downgrade, Sector Specific Risks and Household Debt Increases and Tighter Credit. Possible “Tailwinds” include Mortgage Bond Crisis, Digital Transformation, and the increased usage of AI in manufacturing and trade and an Increase in Consumer Confidence. It’s a “Coin Toss” how things will look down the road. Dr. Spohn proceeded to take a number of questions from Club Members.