Fed survey shows Americans’ financial well-being hit by high inflation

Americans reported that their financial situation had deteriorated sharply due to higher inflation in 2022, new data from the Federal Reserve showed on Monday.

According to a survey published by the US central bank, the share of US adults reporting that they were “least doing well financially” will drop to 73 percent in 2022, down 5 percentage points from last year and the most One of the lower readings. 2016.

Nearly a third reported that they were either “just getting by” or “finding it hard to get by”.

The survey, which recorded responses from more than 11,000 people in October, found 35 percent of Americans said they were worse off financially now than they were a year ago — the highest level since the question was first asked in 2014. .

Fed officials said price pressures were primarily to blame, causing consumers to either stop buying certain goods or switch to cheaper alternatives, and forcing them to dip into their savings. Are.

Sentiment has plummeted as the Fed launched its sharpest monetary tightening campaign in decades to fight extremely high inflation. Throughout 2022, the central bank has raised its benchmark policy rate from near zero to about 4.5 percent, repeatedly counting on a jumbo 0.75 percentage point increase.

After additional rate hikes through 2023, including another quarter-point increase last month, officials are now debating whether to drop further tightening at the next policy meeting in mid-June. A large group of policymakers worry that despite signs of price pressures, only limited progress has been made so far in reducing inflation.

Employers are still hiring and consumers are still spending, although more conservatively than last year, amid growing concern among policymakers that the economy is still maintaining too much momentum.

Complicating the economic outlook is uncertainty over the extent of the ongoing credit crunch, as lenders have pulled back in the wake of multiple bank failures since March. Fed Chair Jay Powell cited it on Friday as he indicated he might prefer to skip another rate hike at the June meeting.

The Fed’s survey indicated on Monday that fewer Americans reported being able to cover an unexpected $400 expense using cash, savings or a credit card that could be paid immediately, compared to only 68 percent. 63 percent answered in the affirmative. Earlier Just over 10 percent said they would “somehow” not be able to cover the expense.

In addition, 18 percent said the largest expense they could cover with savings was less than $100. Another 14 percent said their limit was $499.