December came coupled with another interest rate hike from the Federal Reserve. Despite not being as big as what we have grown accustomed to in 2022, a .5% hike will bring a tremendous impact on the average American’s spending habits.
The question is, how many more of these increases are we going to be able to withstand before the American economy is thrown into a recession? And more importantly, is this the ONLY way that we can address this issue?
I was joined by the Senior Economist and Associate Director of Policy and Research at the Groundwork Collaborative, Dr. Chris Becker, to talk about a recent study that highlights some alternative measures to address inflation, both at home and abroad.
He started out by telling me that we have barely even begun to feel the effects of the current batch in interest rate hikes. “What can happen then is the economy starts growing more slowly. We see slower wage increases, we see unemployment, and ultimately, what the Federal Reserve is risking with these rate hikes, is to cause a recession.” The Fed intends to continue raising the interest rate well into 2023.
Instead of trying the same approach repeatedly with predictable results, Dr. Becker referenced the findings of a study that shows certain industries have a much more sizable contribution to the inflationary prices we’ve experienced over the past year and a half, otherwise known as systemically significant industries. “We’ve faced some really big emergency situations, in some really important sectors.” Between the pandemic, the ensuing aftermath of trying to restart some of the world’s largest systems, or the war between Ukraine and Russia, pinpointing the exact cause of price increases and the measures necessary to combat these prices can be a very tricky process.
There are quite a few industries that we could refer to as systemically significant, but the most obvious one is the oil and gas industry. “Oil matters directly to consumers… but also, because oil is used in other sectors of the economy to produce energy…so it’s not just an increase in oil, that’s an increase across several industries.” In other words addressing price increases in this industry could end up saving money in a number of industries across the board.
We went on to discuss what approaches exist outside of rate hikes, and what he hopes to see take place early on in 2023.
Listen to the entire conversation here.
[Spreaker: Outside the Box]
