High inflation and fears of a recession continue to grip the U.S. economy. So to get answers on what is causing the issues and how to fix them, FOX 5's On The Hill program sat down with Wall Street Journal economics editor, Eric Morath.
The interview with Morath came just days after the Federal Reserve announced it's largest interest rate bump since 1994 and signaled that more rate hikes are ahead. The move Friday was made as the Fed tries to cool off the U.S. economy without causing a recession.
To learn more about the impact of the Fed's move, Tom Fitzgerald asked Morath why the interest rate matters and what the Fed's goal in hiking it was.
"What they’re trying to do here is get that inflation under control by intentionally slowing down the economy. But you're going to see that if you need a mortgage loan, if you’re going to, you know, get a car loan, you’re going to see those higher rates and your credit card bills could be higher," said Morath. "The federal reserve is looking for you to want to pull back a little bit, to slow your spending, and maybe go out to eat one time less. You know, it’s kind of counterintuitive, you don't want to see the economy slow down but when rates are this high, when inflation is this high, they want to kind of pull back on the economy, slow down hiring and take some of that pressure off."
Tom Fitzgerald also asked Morath to weigh in on how spiking inflation happened, and what the Fed missed about the economy.
"The federal reserve, sort of, saying now by doing this historically large rate hike, that it’s kind of indicating they are a little bit behind the curve than before. I think the view was that they thought the economy would come back more slowly from the pandemic. But it really roared back, we had a short, very deep but short recession and then it came roaring back. People wanted to run out and buy computers and TVs and make their homes more comfortable and home renovations. And that caused a lot of demand chasing. We had limited supply of goods," Morath explained to Fitzgerald. "The things went there but Americans quickly got their jobs back that they lost, they received stimulus payments, they had some money to spend and there was limited things to spend it on, so they are willing to pay more for these products, and that pay more, that’s inflation."
Morath also spoke about the growing fears that the U.S. could go into a recession, saying experts believe there is a 50 percent probability it could happen. Despite those concerns, Morath believes that if a recession were to happen, it would not be as deep as 2008.
"I think you are going to see some rising unemployment and less robust growth, for certain. And I think that Is kind of what the fed wants to have happen. Now I think it’s good to keep in mind that not all recessions are 2008. That’s kind of what people have in their minds, that's what they remember. But you can have a shorter, milder recession than that historically difficult one."
Morath concluded the interview weighing in on how he believes the U.S. can right the economic ship, telling FOX 5, "let’s get home prices to a more affordable level, let’s get the supplies on the shelf, and then you won’t have this runaway inflation. It will be a little more under control."
To watch the full interview click the video at the top of the page.
Make sure to tune into On The Hill every Sunday morning on FOX 5, starting at 8:30 a.m.