U.S. consumers are growing more optimistic about inflation, but concerns about job security and personal debt are on the rise, according to the latest survey from the Federal Reserve Bank of New York.
In the Fed’s Survey of Consumer Expectations, inflation is projected to hit 3% a year from now and drop to 2.8% in five years—steady from last month’s figures.
However, respondents anticipate larger price hikes for essentials like gas, rent, and healthcare, while food and college expenses are expected to climb at a slower pace.
Debt worries, though, continue to mount.
For the third month in a row, consumers reported an increasing likelihood of missing debt payments, with the probability rising to 13.6%—a level not seen since the early pandemic days of April 2020.
On the job front, there’s a mix of good and bad news. While fewer people expect to lose their jobs in the next 12 months (dropping to 13.3%, below the year-long average), optimism about finding new work or leaving voluntarily has dimmed.
The chance of landing a job after losing one fell slightly to 52.3%, trailing the 12-month average.
Meanwhile, expectations for both income and spending growth nudged up, with household incomes expected to rise by 3.1% and spending by 5.0%.
This report sets the stage for Wednesday’s much-anticipated inflation data release from the Labor Department.
With the Fed’s next meeting on the horizon, markets are watching closely.
The question on everyone’s mind: How much will the Fed cut rates? The central bank’s current benchmark rate, sitting at a 23-year high of 5.25%-5.50%, has sparked debate on whether a 25 or 50 basis point reduction is coming.
Fed Chair Jerome Powell has signaled that the “time has come” for interest rate cuts amid signs of progress in controlling inflation.
But with consumer sentiment caught between rising costs and growing business debt concerns, the path forward may be anything but smooth.
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