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Cable television broadcasting industry

Interest Rates May Rise Again, Fed Chairman Greenspan Warns

Strategic Insights

— 2 min read

Federal Reserve Chairman Alan Greenspan hinted in a semi-annual speech that interest rates may have to rise again in 1994, just 18 days after the Fed lifted rates for the first time in five years. However, he conceded that upward pressure on US prices appears subdued right now. Meanwhile, the Federal Communications Commission announced plans to reduce cable rates, prompting Bell Atlantic Corp. to call off its proposed $21.4-billion acquisition of Tele-Communications Inc. and Liberty Media Corp. The decision was met with criticism from industry members, who deemed it "arbitrary, unfair and unacceptable."

Key Takeaways:

  • The Federal Reserve predicts inflation will remain around 3 percent in 1994, similar to 1993's level and a modest number in contrast to the double-digit price hikes of the late 1970s.
  • Consumer confidence in the US economy dipped in February from its highest level in three years, but durable-goods orders enjoyed their longest winning streak in six years.
  • The Commerce Department reported a 3.7 percent increase in durable-goods orders to $147.9 billion, the indicator's largest increase since June and the sixth straight rise.
  • The Federal Communications Commission ordered a 7 percent reduction in cable rates, for a total 17 percent rate reduction since its original decrease in April 1993.
  • The FCC's decision was prompted by complaints from TV viewers and an industry survey conducted by the agency, which found that the original rate reduction did not go far enough.
  • Bell Atlantic Corp. called off its proposed $21.4-billion acquisition of Tele-Communications Inc. and Liberty Media Corp. due to the regulatory climate, which made it difficult to value the future of the companies.
  • Unilever, a food and detergent giant, announced it will slash 7,500 jobs worldwide in a bid to improve efficiency and make better use of technology, with approximately 1,000 jobs likely to be cut in Britain.

Statistics:

  • 3 percent: The Federal Reserve's predicted inflation rate for 1994.
  • 22.1 points: The improvement in consumer confidence over a three-month period.
  • 80.8 percent: The Consumer Confidence Index in February, dipping from January's 82.6 percent.
  • 92.6 percent: The highest level of consumer expectations for the next six months since January 1993.
  • $21.4 billion: The proposed acquisition value of Bell Atlantic Corp. of Tele-Communications Inc. and Liberty Media Corp.
  • $147.9 billion: The dollar value of new durable-goods orders in January, boosted by high demand for aircraft.
  • 3.7 percent: The increase in durable-goods orders in January.
  • 7 percent: The reduction in cable rates ordered by the Federal Communications Commission.
  • 17 percent: The total rate reduction in cable rates since the original decrease in April 1993.
  • 7,500: The number of jobs Unilever plans to cut worldwide in a bid to improve efficiency.

Sources:

  • "Federal Reserve Chairman Alan Greenspan" - a speech before a House banking subcommittee, [Date not specified].
  • "Federal Communications Commission" - a press release announcing a 7 percent reduction in cable rates, [Date not specified].
  • "Bell Atlantic Corp." - a statement announcing the cancellation of the proposed $21.4-billion acquisition of Tele-Communications Inc. and Liberty Media Corp., February 1, 1994.
  • "Unilever" - a press release announcing the decision to slash 7,500 jobs worldwide, [Date not specified].

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