NORFOLK, Va. — Retired TCC Business Administration Professor Peter Shaw calls both high interest rates and record-high inflation the "twin tower of pain."
It's causing consumers to back off on buying.
"The real estate market is taking a hit, the interest rates are affecting people buying automobiles and large ticket items," Shaw said.
Often he gets asked by consumers how to handle the financial pain. He tells them the best offense is defense.
"Here's what you do. You take a look at your spending patterns. You carve out the needs from the wants."
The needs are shelter, food, clothing, utilities, medical care, and transportation. Everything else, Shaw said, are wants.
"Stop spending on the wants. Take the cash build-up and apply it as a buffer against the inflationary increase on the cost of your needs."
The federal reserve is expected to raise interest rates again by three-quarters of a percent next week in a continuing effort to control inflation. Shaw believes by June, rates will begin to fall.
"Then pause for a while to see what happens and if it goes good, then they'll start the cuts again."
There is positive economic news. Earlier this week it was announced, the Gross Domestic Product (GDP) grew at a rate higher than expectations at 2.6% in the third quarter. Job growth continues to be strong. Home prices have come down slightly.
Unfortunately, Shaw notes there will be a little more bad going along with the good, including his belief that the country to fall into a recession, albeit a mild one.
"It will be just enough to knock off.... get the inflation rate down to the 2.3% range, the supply chain will get better."