The Federal Reserve is expected to announce a half a point interest rate increase on Wednesday afternoon, which will send mortgage and credit card rates higher, and increase the cost of getting a home equity loan.

According to Rutgers University economist James Hughes, with inflation continuing to surge, the Fed doesn’t really have a choice.

How rising interest rates puts the brakes on inflation

He said the idea here is fairly simple.

“By raising the cost of something you lower demand, and when you lower demand price increases start stabilizing.”

Hughes said one example of this would be the red-hot Jersey housing market, which has been on a tear for the past couple of years.

“By making mortgages more expensive you lower housing demand, and if housing demand is lowered enough those price increases for homes are not going to increase very much,” he said.

He said the Fed is raising rates by half a percentage point instead of the traditional quarter of a point because inflation took off and the Fed was caught off-guard.

“If they see inflation in the future they try to get ahead of the game and start increasing rates first, this time though inflation has surged, so they’re way, way behind the curve,” Hughes said.

How long will it take to slow down inflation?

He said no one really knows the answer to that question.

“They’re going to be watching very closely with all their metrics, what is the impact each time they increase interest rates, is it having a measuring effect,” he said.

Hughes pointed out the sky-high price of gasoline is linked to the price of oil, which is being driven higher by the Russian invasion of Ukraine, so prices at the pump are likely to continue to stay high until that conflict is resolved.

He said you can’t reduce inflation unless you reduce the size of economic growth and “unfortunately, it could push growth into a negative territory and that means a recession.”

David Matthau is a reporter for New Jersey 101.5. You can reach him at david.matthau@townsquaremedia.com

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These are the best hiking spots in New Jersey

A trip to New Jersey doesn't have to be all about the beach. Our state has some incredible trails, waterfalls, and lakes to enjoy.

From the Pine Barrens to the Appalachian Trail to the hidden gems of New Jersey, you have plenty of options for a great hike. Hiking is such a great way to spend time outdoors and enjoy nature, plus it's a great workout.

Before you go out on the trails and explore some of our listeners' suggestions, I have some tips on hiking etiquette from the American Hiking Society.

If you are going downhill and run into an uphill hiker, step to the side and give the uphill hiker space. A hiker going uphill has the right of way unless they stop to catch their breath.

Always stay on the trail, you may see side paths, unless they are marked as an official trail, steer clear of them. By going off-trail you may cause damage to the ecosystems around the trail, the plants, and wildlife that live there.

You also do not want to disturb the wildlife you encounter, just keep your distance from the wildlife and continue hiking.

Bicyclists should yield to hikers and horses. Hikers should also yield to horses, but I’m not sure how many horses you will encounter on the trails in New Jersey.
If you are thinking of bringing your dog on your hike, they should be leashed, and make sure to clean up all pet waste.

Lastly, be mindful of the weather, if the trail is too muddy, it's probably best to save your hike for another day.

I asked our listeners for their suggestions of the best hiking spots in New Jersey, check out their suggestions:

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