Fed's Interest Rate Call My Hinge On Earnings Uptick

Jan. 13, 2005
By John S. McClenahen Despite the marked slowdown in the growth rate of the U.S. economy -- just 3.7% in this year's third calendar quarter -- the Federal Open Market Committee (FOMC) isn't likely to ease short-term interest rates at its Nov. 15 ...
ByJohn S. McClenahen Despite the marked slowdown in the growth rate of the U.S. economy -- just 3.7% in this year's third calendar quarter -- the Federal Open Market Committee (FOMC) isn't likely to ease short-term interest rates at its Nov. 15 meeting. A major reason: a surprising uptick in hourly earnings. Preliminary data for the U.S. Labor Dept.'s Bureau of Labor Statistics show average earnings for private-sector production and non-supervisory workers rose 6 cents per hour to $13.89 during October, a 0.4% increase. In manufacturing, however, the rate of increase was twice as high -- 0.8% -- as the average hourly wage rose to $14.53 from $14.42. This is likely to worry the FOMC, headed by Federal Reserve Board chairman Alan Greenspan. The panel already is biased toward holding inflation in check, and so with the possibility of rising unit labor costs, a cut in the influential federal funds rate seems out of the question. Look for the FOMC to hold the rate at 6.5% next week. "While we believe that the next move from the Fed will be to ease, that move probably won't come as early as the markets expect," opines Bruce Steinberg, chief economist at Merrill Lynch & Co., New York. "Given our growth outlook for next year [3.7% down from 5.2% this year] we doubt that the Fed would ease before the second half [of 2001], if even then."

Popular Sponsored Recommendations

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

3 Best Practices to Create a Product-Centric Competitive Advantage with PRO.FILE PLM

Jan. 25, 2024
Gain insight on best practices and strategies you need to accelerate engineering change management and reduce time to market. Register now for your opportunity to accelerate your...

Transformative Capabilities for XaaS Models in Manufacturing

Feb. 14, 2024
The manufacturing sector is undergoing a pivotal shift toward "servitization," or enhancing product offerings with services and embracing a subscription model. This transition...

Shifting Your Business from Products to Service-Based Business Models: Generating Predictable Revenues

Oct. 27, 2023
Executive summary on a recent IndustryWeek-hosted webinar sponsored by SAP

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!