Governor Murphy warns business leaders of persistent inflation, looming downturn

Gov. Phil Murphy presented a bleaker picture of coming trends in the national economy during a speech to an economic development group Friday, predicting continued inflation and interest rate hikes he said are likely to elevate costs for the state’s consumers.

“I think we’re overweighting the soft landing and underweighting what I fear will be some amount of persistent inflation — not rampant — but I don’t think it’s going to go away as quickly or as starkly as many now expect,” Murphy said during a speech before the Southern New Jersey Development Council.

Though inflation has moderated in recent months, falling to less than half of last year’s annual rate of roughly 8.3%, it has remained above the Federal Reserve’s 2% target.

Over the last year, the consumer price index for urban wage earners and clerical workers has risen by 3.4%, and analysts expect the Fed to continue raising interest rates, though some do not expect it will do so immediately.

Murphy, a Democrat and former Goldman Sachs executive who for months has said he expected the economy to enter into a mild recession, is among those who believe interest rates will continue their climb, causing an uptick in unemployment and a drop in economic activity nationally.

But he predicted a slightly rosier path for New Jersey, noting state revenue has stayed roughly on target through the first half of September.

“I think we’re in a decent place, but I think if there’s a risk, the risk is on the downside — not that the roof’s going to fall in, but that we’re going to have more inflation than we like, the Fed will be raising rates more than cutting them, unemployment probably gets nicked, general economic outlook gets nicked,” he said.