Bracing for a possible recession: What to know about gas prices, interest rates, and your bottom line
PITTSBURGH (KDKA) – If all the talk of a recession and interest rates has you worried, you're in good company.
But, what does it mean to you on a day-to-day basis?
That's the question I posed to financial advisor Rob Wilson.
As individuals, unfortunately, there is almost nothing we can do to prevent whatever is coming so you have to do some evaluating of your own situation.
Generally, the consensus definition of a recession is two straight quarters of negative economic growth.
"What a recession means is that typically when we get into that sort of situation, financial assets start to come down so the stock market gets very volatile and probably goes in the negative direction and jobs aren't as plentiful as they were before," Wilson explained.
However, Wilson said these aren't normal times and even with the coming numbers, the people who declare the recession, the National Bureau of Economic Research, may not see it as a recession.
"Because of the situations that we have now, people do have money in their bank account, by and large, they do have jobs," he said.
That said, he recommends people recession-proof themselves as best they can if they can.
"I would think about either looking for a higher paying job or perhaps simultaneously think about adding a side hustle or creating a side business to create an additional stream of income," Wilson said.
Another economic shoe to drop according to Wilson will be the fed's expected hike of interest rate – the cost of borrowing money.
He said it increases interest rates on everyone in terms of their borrowing.
That means your credit card interests go up, if you have a variable rate mortgage, that could rise, and you will wind up using more of your money to pay for your debt. That means buying will slow and that will impact everything from homes to cars to ketchup.
"Over time, actually, those prices will come down because of these interest rates," Wilson said.
Wilson said it's all kind of a course correction for when things are out of control and the interest rate is the fed's tool to help stop the inflation and get prices to come back down.
That said, it won't happen quickly.
Wilson, again, suggested finding an additional source of income, watch your investments, and if you're young – he believes the market will rebound.
WATCH: Gas Prices Could Fall In A Recession
In all of this, ironically, there is a positive side – the increase could cause gas prices to continue to fall!
As we said, the interest hike is designed to slow spending and stop the rise in prices on everything and most gas is in that boat.
"For the last six weeks, we've seen gas prices now fall over 70 cents a gallon," said Patrick De Haan, an analyst at GasBuddy.
For De Haan, we're in uncharted waters.
"Really, from a historical perspective, one of the biggest declines we've ever seen," he said.
De Haan also said that demand is slowing a bit.
"That combined with gasoline inventories outperformed in the last five weeks, it has provided some meaningful relief as gas prices in Pittsburgh have now declined to an average of $4.59 a gallon," he said.
With the fed set to raise interest rates, it will actually help lower gas prices even further, De Haan said. Especially if it slows spending, inflation, and the economy.
"If we get lucky, maybe 20-to-45 cents a gallon more, but those goalposts could move over time," De Haan said. "It may not necessarily happen in Pennsylvania immediately or Pittsburgh, but maybe nationally by later this year. Again, it's really going to be the subject to the state of the economy and to hurricane season."
That said, there's always a yin with every yang.
"Prepare to spend a lot more to heat your homes this winter and of course gas prices while they see some relief, any savings you get at the pump may end up going through your gas utility this week," he explained.
The reason is, that Europe needs U.S. natural gas for heat this winter to fill the void of no Russian gas, which reduces the supply available here and drives up the price.
So, a possible recession is good for gas prices.
