With inflation continuing to grow, will a recession follow?

The federal reserve has tried raising interest rates to stop inflation. But are their methods working?
Published: Oct. 14, 2022 at 10:33 PM EDT
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LOUISVILLE, Ky. (WAVE) - As temperatures start to come down, prices continue to go up. The price of consumer goods rose to more than 8% in September compared to last year.

The federal reserve has tried raising interest rates to stop inflation. But are their methods working?

The Fed has increased the interest rate five times this year to get inflation under control.

Despite that, prices continue to rise and the word “recession” is starting to get thrown around.

“As we stand right now, we are not in a recession,” Andrew Butters, an assistant professor at the Kelley School of Business said.

People might have heard a recession is two consecutive quarters of monetary losses on goods and services.

Butters said that’s not the case.

“What defines a recession is the National Bureau of Economic Research, that’s a team of economists that are looking at not a single measure of economic activity, they’re looking at lots and lots and lots of economic activity,” Butters said.

Butters said it doesn’t mean a recession isn’t possible. He explained there has been a slow down with the economy.

“I think a lot of economists are very much believing that there is an elevated likelihood that this economy does go into a recession,” Butters said. “More than anything just because the federal reserve is really attempting to bring demand back in line with supply.”

“We buy a couple loaves of French bread already pre-made from the bakery,” Chris Fox, a local shopper said. “Normally we’re used to paying 99 cents a loaf for it, and it’s $1.49 now, so a 25% increase than just two weeks ago.”

Fox and his family are feeling the impacts of inflation. He and his wife have three children.

He said it’s costing more and more to feed them.

“I just walked out of the store to get dinner for the weekend and stuff like that,” Fox said. “The cost of bread, cost of milk, everything is going up and we’re spending an average of $400 to $500 more a month.”

The interest rate is between 3% and 3.5%, and people like Fox are feeling the heat with each new increase.

So has the higher rate been worth it?

“I think it’s a little bit of a mixed bag right here,” Butters said. “Hopefully these interest rate increases play out more throughout and permeate throughout the economy. We’re sort of hoping to bring back, pull back demand and have it more in line with supply, as well as my hope is that we have some good luck on the supply side where we maybe see some more people returning to the labor force.”

The inflation rate is around 8% right now, and the fed is hoping to get it down to 2%.

In September, federal reserve chairman Jerome Powell said more increases to the interest rate will come.