A wage-price spiral triggers an economic recession and collapse

When facing high inflation, policymakers ultimately fear what's referred to as a price-wage spiral, in which a rise in prices prompts workers to demand raises that help them afford goods, which in turn pushes up prices, leading to a self-perpetuating cycle of runaway inflation.

"Inflation is like a cancer where if you don't derail it, it can become a fatal problem," Diane Swonk, the chief economist at KPMG, told ABC News.

Interest rate hikes could plunge the economy into a recession

Seeing a relatively small workforce and strong wage growth, the Federal Reserve will likely continue its series of  to ward off a worst-case scenario of spiraling price increases, economists said.

While preventing a prolonged bout of inflation last seen in the 1980s, the continued interest rate hikes will put further brakes on the economy and increase the likelihood of a recession, they added.

"When the Fed comes in with higher rates, it takes the punch bowl away and the party is over," said Bovino, of S&P Global. "If the Fed has to ramp up rates even higher because of wage pressures feeding into other areas, the Fed takes the punch bowl and smashes it to the ground."

So far, the hiring boom has withstood the Fed's effort to slow the economy. But the job market has shown signs of wobbling, such as a string of  in the tech sector that has struck stalwarts like Amazon and Facebook-parent Meta.

As the economy slows, wage growth will cool and more workers will lose their jobs, but the economy will avert a more debilitating downturn, said Swonk, of KPMG. Eventually, inflation will fall to a rate below that of wage growth, no longer eating away at workers' income, she added.

"Unemployment will rise a bit – that's a hard thing, no question about it," Swonk said. "But it is better to eradicate the risk that this inflation metastasizes and we have to take a much more severe scarring, a deep and disruptive recession."