Economy is healthy except for inflation, which will come down, says finance expert

SALT LAKE CITY — Inflation is hurting everyone but will drop, and the economy is healthy overall for those seeking good jobs in a tight labor market, says a financial expert.

The good news is the price of a barrel of crude oil has fallen about 20% below its record high of $130.5 reached on March 7. But on Wednesday, in an anticipated move, the Federal Reserve bumped up interest rates for the first time since 2018 in order to blunt rising inflation rates not seen as high since the early 1980s. The Fed sees six more rate hikes this year and three more in 2023.

Caleb Silver is a US journalist and the editor-in-chief of Investopedia. He joined KSL NewsRadio’s Dave Noriega and Debbie Dujanovic to discuss the inflation, interest rates and what lies ahead for consumers.

Slow the economy but not too much

“So, what happens if we do end up slowing down the economy too much too quickly?” Dave asked.

“Well, the risk is recession. And that’s the one everybody’s worried about, especially with rising oil prices. Oil prices have come down from their highs from last week, but they’re super-unpredictable right now,” Silver said.

He said the Fed wants to hit the sweet spot: brake the overheated economy without crimping borrowing costs for consumers and businesses seeking new workers.

“Consumers drive 70% of GDP, but it’s also businesses. They’re trying to hire as much as they can in a very tight labor market. But if borrowing costs go up [and] expansion costs go up, that means they may slow down on the hiring,” Silver said.

The sting of inflation should lessen

“How will this hit me in the pocketbook, Caleb?” Debbie asked.

Silver said the borrowing costs will go up for credit cards, and interest rates will rise for car loans and refinancing on other loans and “anything that’s not fixed like a mortgage.”

“How quickly could we see some of this inflation relief? And how much is this going to come down?” Dave asked.

“The Fed says they see inflation at around 4.5%  by the end of 2022. That’s significantly down from the 7.9% we’re feeling right now,” said Silver. “But that’s still pretty high compared to where we’ve been over the last 20 or so years.”

He added the drop in inflation and energy prices are tied to Russia’s war in Ukraine.

Good-paying jobs are out there

“Is there any advantage you can take in this economy?” Dave asked.

“The economy is pretty healthy except for inflation, which is hurting everybody right now,” Silver said.

He pointed out that the labor market is good right now: Wages stalled in the past two month but have been rising over the last year and a half. Because of the shortage of workers, good jobs are out there.

“It’s hard to find people to work for you. But if you have a good idea, now’s a good time to launch it,” Silver said.

 

Dave & Dujanovic can be heard weekdays from 9 a.m. to noon. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app, as well as Apple Podcasts and Google Play.  

Read more: 

• Many Utah consumers feel hopeful about their finances, despite inflation
• Fed begins inflation fight with key rate hike, more to come