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For months experts have been warning of a recession. Is that risk fading?

LEILA FADEL, HOST:

For months now, many analysts and experts who study the economy have told us to expect a recession. Inflation has been high. Some industries are cutting costs and laying off thousands of people, preparing for harder times. But Mark Zandi says now some signs point the other way. He's the chief economist at Moody's Analytics. Good morning, Mark.

MARK ZANDI: Good morning, Leila.

FADEL: So what evidence suggests that we might be OK?

ZANDI: Well, it all boils down to inflation. Inflation has been our No. 1 problem. The Federal Reserve has been raising interest rates very aggressively in an effort to quell that inflation. And we're getting some good news there. We're seeing oil prices down, natural gas, other commodity prices. The economy's doing a good job adjusting to the Russian invasion of Ukraine earlier in the year that's the cause of the higher - previously higher oil prices. We're also getting good news out of China. They're ending their no-COVID policy, and that's key to supply chains and getting prices down for a lot of products that got disrupted during the pandemic. And I guess also important is wage growth in certain parts of the economy starting to moderate. And that's really important with regard to service price inflation in sectors that are very labor intensive, like health care and hospitality. So lots of good news on the inflation front, and that's key to keeping interest rates from rising much more. And that's key to avoiding recession.

FADEL: So if it's not a recession, what is it? And we're completely out of the woods?

ZANDI: Good question. You know, it's important not to be Pollyannish here. I mean, it's going to be a tough year dead ahead. So some people have been calling it a soft landing. It just doesn't feel like an apt description of what's dead ahead of us. It's going to be uncomfortable at times. So not a recession - we're not going backwards - but it feels like economy that's going nowhere fast. So I call it a slowcession.

FADEL: A slowcession. If inflation is fading, as you mentioned, does that mean the Federal Reserve can just stop raising interest rates at this point?

ZANDI: I don't think are going to stop now. They've got - they've told markets and investors and everybody else that they're going to raise rates at least a couple more times. So I think they'll follow through on that. But the good news, Leila, is I think that will be the end of it. So a couple more rate hikes, quarter point each time - that would put the fund rate target, the interest rate they control, at 5%. And I think that should do it. And if that's the case, then we've got a really good chance of getting through this without going into recession.

FADEL: And what does that mean for regular people? I mean, right now we're seeing these layoffs, these cost-cutting measures to get ready for a possible recession. Does that mean that will stop?

ZANDI: Well, layoffs are actually quite low. I mean, they're high in the tech sector, parts of financial services, media. You know, we're seeing it. But across the economy, layoffs are about as low as they've ever been. I would expect them to pick up. You know, again, the economy's not going to get through this without some struggles. So we'll see higher layoffs. But I don't think we're going to get the kind of layoffs that would be consistent with lots of job loss, and that would be recession. So it's going to be uncomfortable, more layoffs, but not something that is consistent with lots of lost jobs and much higher unemployment.

FADEL: The House Republicans are threatening not to raise the U.S. debt limit. Is it possible that the government could provoke a recession?

ZANDI: Yeah, great point. You know, the economy is going to be vulnerable in the next 12, 18 months. And to get through without a downturn, we need a little bit of luck. We can't get hit by another shock, like the pandemic or the Russian invasion. And a breach of the debt limit, which is, you know, coming up here this summer - if we actually stop at the Treasury and the government stops paying its bills on time - that would be a big shock. And it would, even in a strong economy, would push us into recession. Given the vulnerable economy that we're living with, that would be very catastrophic. So lawmakers got to get this done on time.

FADEL: Mark Zandi, chief economist at Moody's Analytics. Thanks, Mark.

ZANDI: Thank you.

(SOUNDBITE OF JOWP SONG, "TYPICAL SPANISH RAPPER") Transcript provided by NPR, Copyright NPR.