Fed Will Raise Interest Rates By End Of Year, Arkansas Tech Economist Predicts

An Arkansas Tech economist told a group of Central Arkansas business leaders on Tuesday that he believes the Federal Open Market Committee (FOMC) will raise interest rates before the end of the year, but the nation’s monetary policy won’t be comparable to the so-called “Greenspan years.”

“The fed has been really laying the groundwork for the rate increase in the past few months,” said Mark Fusaro, associate professor of economics at Arkansas Tech University. “That’s why you have been hearing a lot of talk about the increase so the markets won’t freak-out when it happens.”

However, Fusaro said he believes Federal Reserve Chair Janet Yellen won’t raise interest rates as often or as quickly as Alan Greenspan, who was the nation’s chief economist from 1987 to 2006.

“I would expect to see them to happen in late 2015 or early 2016, but I don’t think we will see the kind of increases we saw during the Greenspan years,” he said.

Fusaro gave his interesting take on the FOMC’s interest rate policy during an hour-long presentation of the newly developed Arkansas Tech Business Index (ATBI), a statewide economic indicator that measures the level of economic activity each month for 16 selected Arkansas cities.

The Russellville economist gave his presentation at the Little Rock Chamber of Commerce as part of the Arkansas Tech index, which is a compilation of local labor market, real estate, construction and retail sales data. Cities that have a reading above 100 are currently doing better than the state average from 2009 to the present.

In December, Fort Smith was the statewide leader with a healthy index reading of 108.79, pushed upward mainly on the area’s robust retail sales. Fayetteville was the second largest economic mover with a reading of 107.92.

El Dorado and Pine Bluff were on the lower end of the scale at 93.58 and 94.14, respectively. In Central Arkansas, Conway was the region’s leader at 102.35. Little Rock and North Little Rock fell below the state average with readings of 96.70 and 95.34 points.

“The big takeaway is that Conway is the strong point of the central Arkansas economy, and Little Rock and North Little Rock are lagging (because) they have the disadvantage of being landlocked and don’t have as much growth as some of the other Arkansas cities,” Fusaro told the roomful of business leaders who attended the ATBI forum.

John Womack, chairman and CEO of Arvest’s central Arkansas operations, said the state’s largest bank is sponsoring the Arkansas Tech Business Index to provide the business community a “forward looking” way to measure economic activity across the state.

Womack added that he was “optimistically encouraged” by recent economic activity that he is seeing in central Arkansas. “From conversations I am hearing, the economy is not robust – but it is improving.”

Under his direction, Fusaro said the ATBI was actually developed as a student project – funded by the LeMoyne and Selma Smith Research Scholarship. Arkansas Tech student Sarah Noel was the first winner of the scholarship in the spring of 2015. She will graduate in December from the business data analytics program at the university’s College of Business.

To learn more about the ATBI, go here.