>> HELLO AND WELCOME TO INSIDE
INDIANA BUSINESS. I'M GERRY
DICK.
FROM SOARING GAS PRICES AT THE
PUMPS TO HIGHER GROCERY BILLS
AND ALMOST EVERYTHING IN
BETWEEN, INFLATION IS HAVING A
BIG IMPACT ON INDIANA'S ECONOMY.
THE LABOR DEPARTMENT SAYS
CONSUMER INFLATION JUMPED 7.9%
OVER THE PAST YEAR. THAT'S THE
SHARPEST SPIKE SINCE 1982.
IS THIS AN INDICATOR OF EVEN
HIGHER PRICES TO COME? WITH
PERSPECTIVE I'M PLEASED TO
WELCOME BACK TO THE SHOW
DIRECTOR OF THE CENTER FOR
BUSINESS AND ECONOMIC RESEARCH
AT BALL STATE UNIVERSITY MIKE
HICKS.
FROM THE BALL STATE CAMPUS,
MIKE, THANKS FOR JOINING US.
>> GOOD TO BE WITH YOU.
>> MIKE, WE SAW THIS WEEK, THE
FEDERAL RESERVE MAKING A MOVE TO
ADDRESS INFLATION WITH AN
INTEREST RATE HIKE.
IS THIS THE BEGINNING OF
SOMETHING WE'RE GOING TO SEE
SEVERAL TIMES MORE YET THIS
YEAR?
>> YEAH, I THINK SO.
THEY MADE PRETTY CLEAR THEY'RE
INTENDING TO RAISE INTEREST
RATES 25 BASIS POINTS EACH
MEETING EVERY SIX WEEKS FOR THE
REST OF THE YEAR.
WE'RE TALKING ABOUT A
ONE-AND-A-HALF TO TWO PERCENT
FULL INCREASE IN THEIR INTEREST
RATES, WHICH WILL BLEED OUT INTO
MORTGAGE RATES, ANY SORT OF
ADDITIONAL CREDIT CARD RATE OR
FINANCING.
>> TALK ABOUT THAT, MIKE, IN
TERMS OF THE IMPACT ON THE
CONSUMER HERE IN INDIANA, IN
TERMS OF RISING RATES.
HOW THAT WILL IMPACT, AND THEN
SUPPLY AND DEMAND, A NUMBER OF
THOSE ISSUES, WHAT THE IMPACT
WILL BE.
>> RIGHT.
SO IF YOU THINK BACK ABOUT 6 TO
9 MONTHS AGO, IT LOOKED LIKE
THIS COULD BE TRANSIENT
INFLATION.
THE NUMBERS YOU READ OFF
INDICATE WE'RE BACK INTO PLAIN
OLD-FASHIONED TOO MUCH MONEY
CHASING TOO FEW GOOD INFLATION.
AS THE FEDERAL RESERVE RAISES
RATES, YOU WOULD EXPECT THAT TO
MODERATE, THE GROWTH IN PRICES
WOULD COME DOWN SUBSTANTIALLY,
WE'RE TARGETING, TWO,
TWO-AND-A-HALF PERCENT, NOT THE
NEARLY 8% THAT HAPPENED LAST
WEEK.
I THINK WHAT WE'LL SEE IS
CONSUMERS WILL BE -- PRICES
AREN'T GOING TO COME BACK DOWN,
THEY'RE JUST GOING TO STOP
RISING, GAS PRICES WILL
MODERATE, WE'LL SEE THE MONTHLY
CHANGE IN THE PRICE OF BREAD IS
GOING TO STOP.
I THINK HERE PRETTY QUICKLY.
THIS IS SOMETHING THE FEDERAL
RESERVE SHOULD BE ABLE TO REIN
IN WITH SIX OR EIGHT HIKES THIS
YEAR.
IF NOT, THEY'LL BE ABLE TO
CONTINUE TO DO OTHER THINGS INTO
ANOTHER YEAR.
I THINK THIS SPELLS A VERY
AGGRESSIVE STEP AGAINST
INFLATION.
>> WHEN YOU TALK ABOUT MORTGAGE
RATES, INCREASING, NOBODY LIKES
TO HEAR THAT.
REALISTICALLY SPEAKING THEY'RE
GOING TO GO UP, BUT NOTHING LIKE
YEARS AGO, MANY OF US REMEMBER,
THOSE EXTREMELY HIGH MORTGAGE
RATES, THEY'RE STILL GOING TO BE
HISTORICALLY WITHIN REASON.
>> RIGHT.
THEY'RE NOW BACK UP TO 3%.
SO IF -- YOU KNOW, MOST OF US
WERE ECSTATIC TO SEE INTEREST
RATES AT 3 OR 4%.
MY FIRST HOME WAS AT 9% IN THE
LATE 80s.
A LOT OF HOOSIERS ARE GOING TO
LISTEN TO YOUR SHOW AND SAY 3%,
THINGS ARE FINE.
IT COULD GO TO FOUR,
FOUR-AND-A-HALF PERCENT.
NOTHING THAT SHOULD CAUSE
CUSTOMERS TO BACK OFF FROM
BUYING HOMES, RVs, OR
AUTOMOBILES IN BIG NUMBERS.
>> LET'S TALK ABOUT THAT
BUSINESS IMPACT.
AS YOU LOOK AT ENERGY COSTS ON
THE RISE CERTAINLY.
I THINK OF THE RV INDUSTRY IN
NORTHERN INDIANA, WHICH IS SO
OBVIOUSLY CRITICAL TO THAT PART
OF THE STATE AND THE ENTIRE
STATE, WHAT DO YOU SEE AS THE
IMPACT?
>> GREAT QUESTION.
I WAS NERVOUS ABOUT THE RV
INDUSTRY, THEY SOLD 400 SOME
THOUSAND IN 2019, THEN 600,000
LAST YEAR.
SO THAT WAS A HUGE SPIKE IN
THEIR PURCHASES, I RAN NUMBERS,
GAS PRICES RISING, AND WITH
INTEREST RATES ANOTHER 2%,
THAT'S GOING TO KNOCK THEM DOWN
MAYBE 50,000 UNITS, WE'RE STILL
TALKING ABOUT THEIR SECOND BEST
YEAR IN HISTORY.
I THINK THE SAME IS TRUE WITH
AUTOMOBILE MANUFACTURING.
THERE IS STILL PLENTY OF PICKUP
DEMAND OUT THERE.
SO I DON'T SEE A YEAR OF
FIGHTING INFLATION AS BEING
SOMETHING THAT PUTS US INTO A
RECESSION OR EVEN NEAR A
RECESSION.
I THINK THIS IS A FAIRLY
STRAIGHTFORWARD PROCESS THAT
WE'RE GOING THROUGH FROM A VERY
LOW PRICE LEVEL TO PRETTY GOOD
OVERALL INTEREST RATES.
>> I WANT TO TALK ABOUT THE
SUPPLY CHAIN ISSUE, STILL A BIG
ISSUE FOR A LOT OF INDIANA
COMPANIES, CERTAINLY, YOU SEE
THAT WORKING ITS WAY OUT AS THE
YEAR PROGRESSES?
>> YEAH.
THERE'S SORT OF TWO THINGS.
WHEN YOU SHUT DOWN THE ECONOMY
AROUND THE WORLD FOR SIX, EIGHT
MONTHS, STARTING IT BACK UP IS
PAINFUL, AND EXCESS DEMAND.
THESE PRODUCTS, MORE WORK IN -
CATCHING BACK UP.
I THINK WE'LL SEE MOST EASING.
CARS ARE STILL GOING TO BE LATE
IN THE NEXT CYCLE YEAR.
WE'RE NOT GOING TO SEE A
COMPLETE RECOVERY.
THE SUPPLY CHAINS WITH THE
EXCEPTION OF WHAT IS HAPPENING
IN UKRAINE AND THE GLOBAL OIL
MARKETS, OUGHT TO BE SOLVING
THEMSELVES PRETTY EFFECTIVELY BY
SUMMER.
>> GREAT PERSPECTIVE, MIKE,
CERTAINLY THE SITUATION IN
UKRAINE WILL BE A WILDCARD IN
ALL OF THIS.
MIKE HICKS FROM THE BALL STATE