Rising Interest Rates May Harm Economy

Jun 27, 2013 8:07am

Morning Business Memo…

Businesses, local governments, and home buyers may all feel the pinch of higher interest rates. With the recent rise of long-term bond yields, some economists worry about the negative impact on the US economy. Rates on 30-year fixed mortgages have gone up almost a full percentage point since they reached record lows during the winter. Higher rates will also raise the cost of financing roads, bridges and other public projects. During the past few days, says The New York Times, “Georgia, Philadelphia, the Metropolitan Transportation Authority in New York and others have delayed sales of new bonds, citing the precipitous plunge in prices that is driving up interest rates.”

This might sound strange. Bad news for the US economy may be good news for the stock market. The official first quarter estimate of US economic growth was cut yesterday from an annual rate of 2.4 percent to 1.8 percent. That raised hopes that the U.S. Federal Reserve will keep in place its bond-buying program, which has been a boon to stock and commodity markets. Stock futures rose this morning after a second strong day in a row for the Dow, S&P 500 and other averages.

Are you working as effectively as you should? A new survey of the US workplace says only one in four employees is in an optimal environment. According to the findings from Gensler, a global design and architecture firm, the rest are struggling to work effectively, resulting in lost productivity, innovation and worker engagement. The report suggests that in many cases open-plan offices are hampering workers’ ability to concentrate.

Satellite TV operator Dish Network is pulling out of its bid for Clearwire – the wireless network operator. Last week Sprint raised its offer to buy the part of Clearwire it doesn’t already own.

The European Union has struck a deal on who will pay for future bank bailouts after the EU’s 27 finance ministers held seven hours of negotiations. Their agreement is seen as an important step toward setting up a banking union with the goal of restoring financial and economic stability to the region.

The biggest city in the country is requiring business owners to give their workers paid sick time. New York’s city council overrode a veto by Mayor Michael Bloomberg to give about 1 million workers up to five paid sick days a year.

Richard Davies Business Correspondent ABC News Radio abcnews.com Twitter: daviesabc

 

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