Continued inflation suggests recession is coming, professor predicts

Berkely, California - Inflation keeps robbing Americans and those of most other nations of buying power. But the U.S. still doing better than most.

Thursday's Consumer Price Index report says overall inflation from September of last year to September of this year is now 8.2%. That's down a tenth of percent from last month. 

"That reflects the prices we have actually been paying for the things we're buying every month; food, energy, clothes medical care, everything consumers buy," said UC Berkeley Haas School of Business economist James Wilcox.

But, Wilcox, says more important than the 8.2% overall rate, is the so-called core inflation rate, 6.6%. That is the highest in 40 years, but far less than the overall rate. 

That's because the core rate strips out highly unstable and quickly changing priced items such as food and energy. It has been a better signal of what future inflation is likely to be. It's a better measure of the inflation that's being built into the economy, according to Wilcox.

He predicts a mild recession next year, followed by a recovery. 

"Returning to more familiar economic performance is on the horizon; not for this year but perhaps by the end of 2023. It will not be any number like 2% but it out to be on a decidedly downward drift," said Wilcox.

But, that all depends on having no major economic upsets. "Any unforeseen developments connected with Russia or connected with Covid or anything like that, said Wilcox.

Wilcox says he expects one more, large interest rate increase followed by a few smaller ones.