>> mr. zandy, welcome back to the pack. >> thanks, pedro. >> where he minds people what your role is in it. >> well, it's a part of the moody's corporation, which also includes the rating industry but it works in providing support to financials around the world and the economies matter and the institutions and that's where i come in helping the companies and institutions trying to understand where the economy is headed in the risk they face because of the economy's performance. >> youom developed a new term called slow session, can you describe thatbe synergy home >> 2023 going into 2024 will be tough and not pushing as high and raising interest rates aggressively to try and quell

the raise in wage prices and getting back down to feeling comfortable and under that environment by the economy struggling, but we have a reasonably good chance, fighting chance of getting through the next year or so without actual recession. recession is a broad based across lots of industries persistent of more than a few months but putting a few quarters declining in economic activity, we won't see that and there's a chance of not seeing that but it will be slow and the economy will be soft and not a recession but but a slow session of the path forward in my view. >> the driving forces behind slow session?

getting back inn and high inflation not consist with a well functioning economy in the longersi run so they're raising interest rates to slow the thing down, cool things off and get job growth down to something that will allow the inflationary pressures to abate and that's the slow part of the at least in the economy-wide in aggregate sense that'll happen. you know, a lot of risk here and a lot of things can go off the rails but there's a fighting chance with a little bit of luck, assuming nothing else goes wrong, badly wrong with some reasonably good policymaking by the fed, raising rates high enough, fast enough to and that

go into if you'd like but the fundamentals of the economy, the kind of things that the balance in the economy that does the economy in during a recession exacerbates them down and makes them worse. you see imbalances but not at this time and it's a slow session. >> mark zandi joining us about questions on the economy and all on the democrat, republican, or independent line. if you want to text us,

(202)748-8003. mr. zandi, you talked about the fed and attitudes towards rates and we'll see rates but maybe not as high this coming year and if that's the case >> it's going to raise rates more and very aggressively last year in 2022. it's hard to l believe but you o back to this time last year, the federal funds rate target that's the interest rate that the reserve directly controls and that was close to zero, close to zero and now sitting somewhere 4.25, 4.5% and that's a pretty big change in a short period of time. investors and financial markets are expecting the fed to raise rates another half percentage point over the next couple three months andhs by spring the funds target is at zero and close to

5%. just for context, the best estimates of the interest rate that's consist here in the next few months and double that rate with neutral respect w to the economy. the fed is working really hard to bring in the inflation. now after that it's hard to know what has to happen and place that has to come in for the feds to rate interest rates and that's going to happen and that's the most likely scenario but if i'm wrong and high and persistent with the feds racing rates and higher rates coming and how muchhi higher will theyo here in 2023. >> part of your analysis and technical so you'll have to explain for everyone at home.

coming downturn and tried and true leaders of recession and most notable is the deep treasury yielde curve and can you explain and put into context? >> yes, i can. sure. one of those very priebus cent leading indicators is the shape of the long term interest rates say 10 year treasury yield and the rates that the fed controls and typically in the short term interest rates and federal fund target and there are points historically when so called inverts meaning short rates rise above long rates and federal reserve is raising rates very aggressively like they are now

as they i have been doing over the past year and when that yield curve inverts and the federal funds rate rises above the 10-year treasury yield at least historically and we've had 12 recessions since world war ii and go back and look that yield curve and 10-year treasury yield and that inverted back in december and if you were taking the yield curve literally and assuming that interest rates are a perfect guide, that would suggest that recession by some point and going down and there's some reasons to be cautious about literally interpreting the change and recession data ahead

and a lot of economists think a recession is likely in 2023. >> talked a lot about the federal reserve and if it reacted sooner to what it's seeing as far as what's going on with the economy, would results be different? >> probably. they were slow. this time last year it was becoming an and shall it was strong and degree ago lot of jobs declining and i hesitate to be too critical here and critical at all really because russia didn't invade ukraine until february and that was a very significant global economic event and it caused oil prices to go skyrocketing and you might not remember, scott but back to the summer of last year, june to beea precise but we're paying $5 nationwide and $5 for a gallon

of unleaded and that's directly going back to the russian invasion of the sanctions and put on the russian oil, the british put on russian oil and european union put on russian oil and caused prices to jump and the fed could not have predicted that or forecasted that or made policy based on that and, yeah, if they'd been more aggressive earlier on on the situation today would be less serious and we'd still have issues with inflation and recession higher and we probably wouldn't be as difficult as that but hard to be critical of the federal reserve given just the uncertainties created by that and i should also say the pandemic was still again hard to remember that and dealing with the omicron wave of the virus and global supply chain and local job market and creating pressures and very, very

difficult to gauge how that plays outt and critical policy. >> first call from california, this is rick on the line for democrats. you're on with the guest. go ahead, please. >> good morning, mark and pedro. my question is republicans are talking about busting through the debt ceiling and not raising it. how will that affect my retirement, my pension, and my investments? >> yeah, thank you for the question. it would be catastrophic to your investments, to your settlements and let me step back for a second toba make this more clea, the debt limit obviously is the limit on the amount of treasury debt that can be outstanding,

we're butting up against that limit and if we hit that limit, it's all the cash he has in his bank accounts and can't issue more ponds or treasury bonds to financee the government's spending and tax policy. someone's not going to get paid and the treasury can't cut a check to somebody to be a social security recipient, it could be someone in the military or could be bopped holders and treasury bonds from you may have that in your pension plan to a foreign investor and middle eastern investors and chinese invest it was, japanese. if someone doesn't get paid, then that's going to send a bond throughout the global financial system because one of the bedrock principles of well functioning global financial systems is the u.s. pace its debtshe on time.

it's risk free so if you buy a bondti from the u.s. treasury, you're going to get your money back and interest, no questions asked. if someone doesn't get paid because of the debt limit breach, that blows that out of the water or that confidence out of the water and they're going to go skyward and investors going to say, now i'm going to enshrine them and pay me more to compensate for that risk and everything will be a lot less andis stocks will be worth a lot less and bonds worth a lot less and housing worth a lot less and commercial real estate -- everything worth a lot less and that goes right to your retirement savings. it would beti catastrophic and o catastrophic and hard to imagine that even with the dysfunction we're observing in washington that they -- lawmakers allow that to happen and go down that path. obviously that's down in the

future. >> thank you for taking my call. my question is i've heard some people talking about how once we get through to the initial inflation with the interest rates because of the on shoring and near shoring and sort of labor shortages and i just wanted to know what your thoughts are on that? >> yeah, thank you for that, pedro, and listening to my podcast of the play taint line and we have every weekend and enjoying very much and there's a lot of debate, reasonable debate about where inflation celts

afters. all this and federal reserve wins the day on raising interest rates high enough, long enough to get inflation back down and they have a target and their target for consumer price inflation, cpi inflation and that's the lead inflation number that most people focus on. they focus on the inflation statistics at all. it's about 10.5%. we're at 7% and another cpi this week and inflation continues to moderate at 6.5% year over year consumer price inflation at the rate of increase in the prices for the goods and services that we're purchasing over the past year. we need to get going from 6.5 to 2.5 and the fed will do whatever it takes including pushing them intofe recession to get that do. once that incurs, it will occur and probably not in 2023 but sometime in 2024 there's a lot of cross currents pushing and

pulling and restraining inflation that's unclear where that's going to settle. my own sensese is cutting throuh all those cross currents and all the tail ends going forward and the fed will get what it wants ultimately and we get targets close to the half and maybe having god forward and battling more to keep them out of the game.to it's longer with a strong tail wind of inflation the fed will have to battle and one of those you mention is the near shoring and rear shoring and because of the supply chain issues and the pandemic between china and other efforts and businesses to bring back supply chains closer to home here in the u.s. and north america and mexico and canada.

that means it'll be more costly to produce those goods and that may add to inflation but in the longer run, the federal reserve can calibrate the interest rate policies to get the rate they want and have to keep rates higher than the other ways if there's broader inflationary reports pushing on inflation. >> a lot of people call the program and lookle at inflation through the lens of gasoline prices or food or the price of eggs. how do you factor those into a economic picture, particularly for those not following economics like you follow economic s? >> it's a great point, pedro. the one thing that most people really focus onto try and gauge where inflation is and how big is the cost of a gallon of regular unledded. that's the test for everybody

driving or shopping and going by your local gasoline station and going by that price, good news is more optimistic that inflation will continue to come in and we can't afford and fed will raise rates that high and avoid a recession and back down close tore $3 a gallon for regur unleaded and remember back in june of last year at an all time high as a result of the russian invasion of ukraine in the sanction, we had $5 on the nose. literally on the nose.ai that was a record high. right before russia and became clear that russia began to invade ukraine and it was perfect and functioning really well and we get $2.50, $2.75 but we're at 3 and continues to move lower and oil prices going lower and a lot of cross currents here

too and sanctions on russian oil and r pushing up prices but we'e seeing a weak chinese economy because china consumes and demands a lot of oil that demand is down and weighing against oil prices and here at home, we're getting more efficient and with that and going back for the pandemic and consuming 21 million-barrels of oil a day andda not visible across the gle and we're consuming about 28 million-barrel as day and reduced ourrr consumption of oil before the pandemic by 1 million-barrel as day and that's pretty consequential and that's the key that key prices with most people focus on and oil prices with their impact on

diesel prices was critical to food prices because a big part of the cost of food that we pay and those eggs you mentioned or milk or meats or whatever, vegetables and the cost of a lot of that is the cost of getting from the farm, the ranch, to the store shelf and diesel prices are high and food prices will be high and diesel prices coming in and a lot of risk for oil prices going up veryy quickly and for the moment, feels pretty good, pedro, $3 a gallon feels like a pretty good price and i think people are feeling a bit better about inflation right now as a result.e >> you talked about jobs numbers coming out last week, 3.9% unemployment rate and 199,000 jobs added. what didpl you make of those number s? >> i thought they were very good. you know, going back into the context of the fed wants to raise rates high enough and not raising sogs high and so fast tt

it undermines the economy and that's a jobs report that the numbers were consist with that effort and that was slowing and very definitively and back a year ago and the economy was creating 500, 600,000 jobs per month on average and now same jobs numbers half that between 200 to 250,000 and looking deep into the numbers like i do, then it's down into the bowls of the data and bowels of the data and indicating that job growth will slow here and it sounds weird to people i'm rooting for job growth and typically wouldn't be that you want jobs and right now the economy is very low on unemployment and 50-year low and 300% unemployment rate and labor market is tight and businesses are having trouble finding qualified workers and that goes to the inflationary departure and at this point in time where we are today, we see slowing and

don't want to see job losses and see significant orders in layoffs but a moderation and that was the message in the jobs report that that in fact was exactly what's happening and we need to see more of it, pedro, but i'll take it that it felt pretty good last friday and that's why the stock market if you noticed had a very good day last friday because the stock investors interpreted the numbers like i did, just like i did. >> brandon in washington state, democrats line and you're on with mark zandi, good morning. >> good morning. two comments, one it on inflation and one on interest rates and first inflation with the covid spending and where would we be if we had not helped people put food on the table and stay in their homes and second on interest rates, historically i believe they're quite low. i feel for the younger people because they don't know any different but old folks know better anden i can remember in e 90s when they hovered 7, 9% and

i think the problem is after 9/11 when they were plummeting, they were kept artificially low for too long and, again, that's why i do feel for the young folks because they don't know any different and certainly now hard to get a home but all of the folks, they know better. thank you. >> thank you. i'm old too as you can tell. my hairline is receding here seen a lot so i've of different interest rate environments and you're right. the 30- year fixed mortgage rate and that is sitting at about 6.5% and, you know, for anyone who's been in the job market for the last probably the last 15, 20 years, that's pretty -- feels pretty high and in fact if you go back a year ago when interest rates were at their low, you can

atget a 30-year fixed rate mortgage loan for probably 2.5, 2.75% and that feels impossible now and it's a problem for momentum buyers because when rates are very low, that create a lot of demand for homes and that juiced up house prices housing is not affordable and mortgage 6.5 and highest house prices is the mortgage payment is $700 more a month than about a year ago and for most people, that's just not affordable and 6.5% feels pretty uncomfortable. you go back to the '70s and '80s

we saw mortgage rates well into wethe double digits lower than that but higher than most are used to and more dang than that. the existing home sale dipped 7.7% in november and is that something to watch? is that a cause for concern? >> well, that's to my point. i mean, 6.5% plus the high house prices, affordability, mortgage payments have jumped and affordability collapsed and people can't afford this and casales have fallen and demand s fallen and that's the housing in a single family housing is the weakest part of the economy, which, pedro, shouldn't be a surprise. the federal reserve is raising interest rates in an effort to slow down cool off the economy in the most interest rate census sector of the economy will feel

bipartisan and nothing more than in housing and if we want to go buy ain home, we have to get a mortgage and large amount of and those mortgage payments are very high and very, very sensitive to moves and interest rates and housing is in recessionto and it is contractig and that part of the economy is going backwards and sales are down and building is down and of course house prices are now starting to fall in many parts of the country and that part of the economy, that's in recession. housing is struggling and that's something to watch and now i will say it's in the housing market as we did back in the financial crisis and not going to happen for a lot of reasons we talk about so i don't think that's the case, but we need to watch when housing prices fall and people got into a situation house value is less than the mortgage they owed on

the house and that's not a good place to be if your income is disrupted by unemployment or it's something to watch. >> nelson is in florida, republican line. nelson in florida. good morning. going to ken, south dakota, independent line. you're on with mark zandi. go ahead. >> good morning. thank you very much and thank you, mark.k. you're a very good teacher.

>> thank you for the kind words. i've been told i'm a pretty impatientac teacher, just ask my kids. they don't want me teaching anything. but i'll take it. the idea is if you buy a long term bond and bond going back to 10 year treasury yield that i was talking about earlier, that has a bond for ten years and a lot of things happening in 10 years compared to a three month treasury bill, something that expires or pays off in three months. there's a lot of things that can

go -- that can affect the prevailing interest rates that exist at the time ten years from now and to compensate for that uncertainty, that risk, just the fact that long periods of time happen and demand ago higher interest rate and that difference between long andgh short rates isn't significant for a treasury bond and other kinds of bonds and can be significant and the federal funds target rate and that should be somewhere around 2.5%, that neutral with respect to the economy neither adding or subtracting from the i economy's growth. 4.510% yield and 1.5 percentage points and that's the typical difference between long and short rates that's prevailed historically. b

>> mr. zandi, a viewer off of twitter asking this question, can you explain why china, japan,ex switzerland have lit tl no inflation. what are they doing differently? >> well, in the case of japan, interestingly enough, inflation is upca for japan. their inflation rate is pretty darn high. it's low by our standards, but they're looking at inflation that's around 3%. going back and forth, they were flirting with zero and battling deflation outright declines in prices and that's a situation they've been in going back into the early '90s and largely the japanese issue is their economy is more or less in terms of working age population and labor force declining and there's no issues in japan and they don't come to japan like the united states and the size of it is declining and downward pressure on demand and prices and it's spiraling with deflation so fast

that deflation is up to the 3% rate and high by japanese higher inflation and inflation is close to our target in the 2, 2.5% range and do that as a positive development, but inflation picked up there quite a bit. pulling inflation down and keeping inflation relatively low

there. >> some news today and i guess lifting of covid cuts and border cutsf and the applications for passport up in china f and may e different trends there. >> exactly right. i mean, opening up and trying to open up. it'll take a bit of time and everyone is getting sick and ended lockdowns and so called no covid policy so now they're getting sick like we did a year or two ago so it's going to delay things for a few months but you're right, pedro, by spring or summer on the illnesses revving up again and grow a lot more strongly, inflation starts picking up there as wellag and by the way, china will be buying more oil. >> robert in utah, independent line. good morning. >> good morning. i get real frustrated listening to the political hacks of the

democratic party. our economy two years ago, before biden came into office, was just screaming along and it just blows me away how you accept $3.5, $4 gas prices when this situation was caused directly from policies from the biden administration. it makes me believe, you know, that when i listen to people like mr. zandi that he's so full of crap like his dog walking around with a diaper on -- >> okay, caller, we're going to leave it there and no point to insult the guest and if you want to respond to the biden administration and his policies, what do you think. >> yeah, sorry about the dog, he's old, he's 17, poor guy. obviously we're very sad to see that so unfortunate l and sorry about that. can't control him here at home.

yeah, in my view, the runup in oil prices and higher gas prices, they're back down. if you look, they're $3 a gallon for regular a unleaded. that's pretty close to where you'd expect to be based off historical norms but the higher oil prices, it echoes right back to the russian invasion of ukraine and you can see that veryo clearly in the data. prior just when it became clear that russia was going to invade, there was a lot of discussion about it back in 2021, that's when oil prices really started to pick up again. there's been a lot of concern hindering about policies and constraining the ability and willingness of so called frackers to put and invest in putting more oil rigs and that's not happening. at least not in the data and take a look.

folks attract this very closely. 23 you look, number of isle and natural gas rigs in place today is exactly equal to where it was before the pandemic hit. i think it's 740 rigs out there in operation so steadily up since the bottom of when the pandemic hit. maybe russia exports a lot of oil and sanction it and stop buying and put price caps on it and that all seems perfect to me in the context of the russian invasion ofro ukraine and higher oil prices and higher costs at the, pump and that's exactly wt we saw. >> mr. zandi, you wrote a recent piece looking at the stock market and a give your analysiss far as what it did in 2022 and what expectations are for 2023.

>> well great deal on prep disagreement and stock markets go up and down and you should be invested in a long run and saving andth investing and in a consist way every single month, and if you're in the stock market, shouldn't need that in the future for 5, 10:00 o'clock 15 years, 25 -- 5, 10, 15 years down the road and pay attention to all this. at the end of the day when you make an investment in the stock market, you're investing in the future of the american economy and that's been a good boat historically. we have our problems, things go up and down and all around and recessions like every other economy but in the long run, we do very well and stocks do well also. just that as a preface. here in the near term, if you're

buying into what i say and the rates are raised more and not a lot more and close to the end of the rate hikes and inflation will come in and continue to come in in a reasonably graceful way and have to continue to raise rates and second to buy into my slow session view of the world that it's goingio to be a struggle but we're not going into a full blown outright economic downturn or recession, then those two things together suggest, hey, i don't think stocks will come roaring back any time soon we have to do all these things directly to unfold and if they dorks i expect the stock prices to move higher towards the end of this year going into 2024. for most folkses don't try to time anything and can't do it and should be investing for the long run. >> this is john, california, republican line. >> appreciate you coming on tonight and what we're hearing

here is the left wing of economics and more conservative views of economics and as it would be catastrophic if the government defaulted on it is debt and things like that, i agree it's also going to be catastrophic if we continue to plant this money and there's nothing to back it and you can point to germany in the 1930s where it took a wheelbarrow above march to buy a loaf of bread and that's the path we're on and republicans will get hammered about holding the line on the debt limit and wonder if mr. gun i did has an opinion -- mr. zandi haspp an opinion on if we print one $100 bill too many and that's what we're doing and people will get paid and people get social security checks, including myself. but the question is is it going to be worth anything is the couple thousands you get from the government, is that going to

cover your prescriptions cost for a month or something like that?ik cspan, you need to balance these things up and i hear the same people and my respects to mr. zandi, i've listened to his podcast, and you are just a staunch left winger. to tribute the rise in -- to attribute the rise in gasoline to the war in ukraine and putin's price hike, which is a democrat talking point by the way, biden raised the price of gas the first day he was in office by limiting the amount of exploration, limiting the amount of drilling for the first time i can remember that we were energy independent in myy lifetime -- >> okay, we're going to stop you there because we're running out of time and let our guest to respond. when it comes to economics, we present at lot of different perspectives on that program. i know that and you can look

back and see that for yourself. mr. zandi, go ahead, please.se >> i appreciate the caller's perspective. one area where i think we could agree on, and sounds like we agree on the debt limit and that's great because that wouldt be really catastrophic for everyone if we reached it. ... we can increase the size of our deficit. we need to bring the dead and because i agree in the long run if we are not more fiscally prudent that will be a problem. i don't think this issue, i mean obviously you provided a lot of support during a pandemic and by

the way every country and the planet said roughly the same thing. at the end of the day the government does a backstop when we are crisis in the pandemic was aor crisis. here we are today on the other side of the third our debt loads are high and i think we need to be more fiscally prudent going forward. we have come up with a new package for increased spending or whatever does. we have to come up with ways to pay for that either with cuts in other spending or increases in tax and we will cut taxes for whatever reason and with we have to pay for it and come up with spending cuts a reduction or increases in other taxes to pay for it. i think that was coming through in the presidents remarks and i'm 100% behind that. we need to be fiscally prudent going for it. mark zandi with moody's analytics you can find his work

on economy.com for the latest look at 2023. mr. zandi as always thank you for your time. anytime. thanks everyone, thank you. we will leave this program here but you can watch it every day we take your calls live on air on the news of the day and to discuss policy issues that impact you. coming up wednesday morning mercatus center researcher discusses new efforts by congress to investigate the impact and influence of the chinese communist party. california democratic congresswoman judy chu talked about the battle over house speaker and democrat strategy. also russia and tennessee represent a congressman and the vocal and why he ran for congress and his legislative priorities in a new seat in congress. watch "washington journal" live at seven eastern. join the discussion with your phonecalls comments texts and

tweets.