NEW YORK (CNNfn) -- Despite the U.S. Federal Reserve's decision Wednesday to leave interest rates unchanged, many on Wall Street believe a rate hike is imminent as wage pressures cut into corporate profits.
"Alan Greenspan made it very clear that he thinks that at this stage of the expansion its better to err on the side of restraint rather than err on the side of ease," former Fed governor Wayne Angell said on CNNfn's "Before Hours" Thursday.
While the economy is growing at a moderate pace, Angell, the chief economist at Bear Stearns, sees reason for concern in evidence that hourly wages are rising. That could signal a trend where supply vastly outweighs demand, a development likely to raise inflation and destabilize the economy, he said.
Yet the demise of the nearly seven-year Bull market is far from a certainty. Angell and other fiscal conservatives admit that by keeping the Congress under Republican control voters might have extended the life of economic growth.
"Things are going quite well," he said. "We do have the Republicans in control of the House and the Senate and that means we'll stay on track in regard to not over-regulating business, in regard to proceeding to a balanced budget. There is a bunch of good news out there."
Angell also pointed to the recent decision by Sunbeam Corp. Chairman Albert "Chainsaw Al" Dunlap to slice the company's workforce by half as a sign that bloated companies will remain willing to cut jobs in order to save money and maintain profits. It's not particularly good news for workers, but to many Wall Streeters, higher unemployment is just the answer to strong demand and lurking inflation. (271K WAV) or (271K AIFF)
"I do expect this kind of cutting to continue," the economist said. "But every time someone's cutting jobs and adjusting their labor force to new technology and new ways of producing, there are other companies out there staring up that are hiring. So the number of new hires are going to overcome those job cuts."