Page 6 - BusinessWest January 6, 2025

Andrew Melendez says entrepreneurship is key to filling vacant storefronts — and creating more vibrancy — in the region’s gateway cities.
they can get for their square footage,” he explained. “What we need are people willing to come together and negotiate.”
For BusinessWest’s annual Economic Outlook, we talked with business and economic-development leaders about these issues and the many others that will shape 2025 — and beyond.
Matters of Interest
Adding to the speculation — and anxiety — about what might come in 2025 was the Federal Reserve’s recent decision to package its 25-basis-point cut in interest rates last month with indications that it will
only cut rates twice in 2025, down from four in its previous forecast.
Tom Senecal, CEO and chairman at Holyoke- based PeoplesBank, had read about projections
for fewer cuts before the strong hints from the
Fed, and said they speak loudly to the fact that the fight to lower inflation is far from over.
“Inflation is at 2.7% and trending upwards,” he noted. “If they do more rate cuts, they’re fearful that inflation will creep
back in, so I don’t think we’re going to see the rate cuts we thought we were going to get.”
A slower pace of rate cuts, or even rate increases, which some economists project might actually hap- pen if inflation climbs higher and the Fed sees the need to step in, would not be good news for banks, Senecal said, noting, as others in the industry have, that 2024 was a year of reckoning, when higher rates on deposits, coupled with loans locked in at lower rates, squeezed margins to uncomfortable levels.
Compounding matters further is that there is now a deposit crunch, Senecal added, noting that, while deposit rates soared during the pandemic when people were spending less, they’ve been dwindling as customers battle the higher costs of ... just about everything. Now, as always, banks need deposits to fuel loans, and there’s a pitched battle for them.
“With no deposit growth, banks are getting squeezed in their ability to lend, which ultimately
impacts economic growth,” he said, adding that fac- tors such as these should fuel more M&A activity, such as the announced ‘merger of equals’ between Berkshire Hills Bancorp and Brookline Bancorp (see story on page 28).
“Scale and efficiency are huge these days because of where interest rates are,” he explained. “Margins are extremely tight, costs are extremely high, and banks are starting to realize that, to compete, you have to have scale.”
“Inflation is at 2.7% and trending upwards. If they do more rate cuts, they’re fearful that inflation will creep back in, so I don’t think we’re going to see the rate cuts we thought we were going to get.”
Despite the many challenges facing banks and the general uncertainty regarding the economy, Senecal said he’s cautiously optimistic, a sentiment shared
by Campbell, who said there are caveats to this opti- mism. The possible dockworkers’ strike would be the most immediate, and tariffs would be the largest.
“I don’t see any good coming from tariffs — it’s simple math,” she said. “If the parts are coming from China and there’s a huge tariff on those parts, I don’t see how that can help manufacturers — or us.” Overall, Nakosteen said, the Biden administra- tion is hand-
ing the Trump
administration a
relatively sound
Outlook
>>
Continued on page 36
Sooner Rather than Later
How you plan today can impact your tomorrow. It helps having advisors working in your best interests, one who can navigate through the complexities and nuances that at
times, can be overwhelming for most of us.
Together we’ll craft a plan designed to meet your goals. We’d like to hear your story, and that starts with a conversation.
To learn more, please call Patricia M. Matty,AIF® at 413-733-5111.
1500 Main Street Springfield, MA 01115 (413) 733-5111
www.stgermaininvestments.com
6 JANUARY 6, 2025
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