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Reports: US Interest Rates, Oil Prices Headed Up

  • Jim Randle

Researchers who track business activities and survey economists say U.S. interest rates, stock market gyrations, and the price of oil are all likely to increase later this year. The uncertain future is causing many companies to take cautious measures with their business strategies.

Home Depot, a major hardware retailer, is one of many companies that all together spent $104 billion buying back their own stock in February.

The investment research firm Trimtabs says that is a record-high.

Retailers Foot Locker and Gap were among the firms doing buybacks, along with information technology firms. Buybacks reduce the number of shares outstanding and tend to raise their value.

While this pleases company shareholders, it is a more cautious move than expanding by putting money into new equipment and employees, according to Trimtabs head David Santschi, who spoke via Skype.

"It is a moderate vote of confidence in the economy, but it would certainly be better [for the economy] to see companies doing other things with their money if they really were gung-ho bullish [very optimistic]," said Santschi.

Investing in new buildings and equipment is more likely to increase the number of jobs.

Those jobs are on the way, as the U.S. economy recovers, says the head of the National Association for Business Economics, John Silvia.

"The current economic environment is positive for more hiring going forward," said Silvia.

Retail sales are among the activities affected by interest rates, which were cut nearly to zero to help the economy during the recession.

Silvia says hundreds of economists surveyed by the NABE say interest rates are about right for now, and should rise later this year, because the recovering economy no longer needs help from the record-low interest rates set by the U.S. Federal Reserve.

"Overall thinking is by the end of this year it will go up a ‘modest’ amount. So it won’t be 25 basis points [one-quarter of a percentage point] every [Fed] meeting [every six weeks]," he said.

Stock markets have been more stable in recent years because of the Fed's efforts to boost the economy, according to Bankrate.com's Mike Hamrick. He says as the Fed cuts back its emergency measures, stock markets could be more volatile.

Speaking via Skype, Hamrick also says Bankrate's survey of 25 economists found a consensus that oil prices are headed upward this year.

"Roughly a 30 percent increase from the current level, so that may tell us that, for consumers in the United States at least, the best news on gasoline prices may be behind," said Hamrick.

Oil prices and other issues will be considered by Federal Reserve officials next Tuesday and Wednesday when they debate interest rate policy and other economic issues.

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