Household financial worries at highest level since 2022, New York Fed says

The latest survey from the Federal Reserve Bank of New York reveals that U.S. households are feeling increasingly worried about their financial situation. The survey, released on Monday, shows that a growing number of people believe that their current financial situation is much worse than it was a year ago, reaching a nearly four-year high.

According to the survey, the inflation outlook remains relatively unchanged, but overall perceptions of economic conditions have deteriorated. The percentage of respondents who see their current situation as “much worse” than a year ago has jumped to 13.3%, up by 2.7 percentage points from April. This is the highest level recorded since July 2022. Additionally, the total percentage of respondents who see their situation as either much or somewhat worse than a year ago has reached 43.7%, the highest level since January 2023.

Looking ahead, the outlook for the coming year is also bleak. Only 22.9% of respondents expect their situation to improve, while 36% believe it will worsen. This results in the lowest net balance between positive and negative perceptions since October 2022.

One of the key concerns for consumers is the inflationary impact of the conflict in Iran, which has led to a significant increase in energy prices. While some Federal Reserve policymakers are worried that prolonged conflict could raise inflation expectations among consumers and businesses, the survey indicates that consumer worries about prices have remained relatively stable.

Inflation expectations for the one-year horizon have only declined by 0.1 percentage point to 3.5%. Expectations for gasoline prices have actually decreased, while expectations for food and rent have risen. The outlook for household spending growth over the next year has also declined slightly.

The Federal Open Market Committee is set to make its next interest rate decision on June 17. While markets are not expecting a rate cut, there is a growing expectation that the central bank may hike rates by a quarter percentage point by the end of the year.

Overall, the survey highlights the growing concerns among U.S. households about their financial situation and the potential impact of inflation on their everyday expenses. Consumers will be closely watching the upcoming consumer price index release for May to gauge the extent of inflationary pressures in the economy.