New York Times: For Tech Companies, Years of Easy Money Yield to Hard Times
Rock-bottom rates were the secret engine fueling $1 billion start-ups and virtual attempts to conquer the physical world. But in 2023, reality bites.
There’s always a consequence to action.
- In reaction to the Covid-19 pandemic, the Fed dropped interest rates to near-zero in April 2020.
- Low-interest rates caused some investors to look to Silicon Valley for returns, pumping money into start-ups that need big-time financing to grow.
- The boom may be ending now that interest rates are increasing.
- Higher borrowing costs are resulting in tech company layoff announcements.
Definition: The federal funds rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight.