Even though a majority of Americans believe the economy is doing poorly (according to a recent Gallup poll), it appears to be going strong. This week even brought some welcome economic news – lower gas prices and no interest rate hikes.
“Five weeks ago, we were talking about it heading back to $100 a barrel,” said Newell Normand this week in an interview with Guy Williams of Gulf Bank & Trust.
Per AAA, gas prices in the U.S. were down Wednesday compared to the year before, the month before, the week before and the day before at around $3.12. That’s even as war rages in the Middle East and Ukraine.
“The one thing we know for sure is that as oil gets cheaper, people start to use more of it,” Williams told Normand. He said this is true outside of the U.S. as well, using Indonesia and India as examples.
“So, this is a trend that can’t go super low because unless you have a vast new supply of oil, as the price goes down, people will consume more of that oil,” he explained. “The only time that wouldn’t happen is if we’re in a global depression where people just don’t have money and can’t consume it.”
While gas prices are down, the Bureau of Labor Statistics released a report Tuesday that showed inflation rose by 0.1% in November after remaining flat in October. Over the past 12 months, the Consumer Price Index has risen by 3.1%.
“It is trending down, but it’s stuck above 2%,” said Williams, referencing the Federal Reserve Bank’s inflation goal. “And I mean, it is just not getting down to the 2% rate that they want, which is another reason that the Fed will probably keep rates a bit higher.”
In an effort to bring down inflation, the Fed has raised interest rates several times, making it more expensive to borrow money and putting even more pressure on American consumers as prices climb higher. The Federal Reserve announced Wednesday that it would keep rates flat for now. It also indicated three upcoming rate cuts, according to CNBC.
Williams noted that the COVID-19 pandemic has made rates complicated.
“For a while, it was it was pretty nice. You know, a lot of money flowing, a lot of federal dollars flowing in. It seemed like there was no end to no consequence,” he said. “So, yeah, I think we did get spoiled. And as I tell the kids, you know, we baby boomers had a party. You guys... get to pick up and pay the bill.”
Listen to Williams’ full talk with Normand here to get the full scoop on the state of the economy.