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HomefinanceOutlook for credit access hits record low, inflation expectations jump

Outlook for credit access hits record low, inflation expectations jump


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A customer shops for eggs at a H-E-B grocery store on February 08, 2023 in Austin, Texas. Wholesale egg prices have begun declining more than 50% since December record highs according to Urner Barry data.

Brandon Bell | Getty Images News | Getty Images

Consumers are getting more pessimistic about inflation and their access to credit, according to the results of a monthly survey the New York Federal Reserve released Monday.

Respondents expect prices to rise by half a percentage point in the year ahead, equating to a 4.7% annual gain, the central bank branch’s Survey of Consumer Expectations for March showed.

That’s the first time the near-term outlook increased since October and runs counter to the narrative from Fed officials that they expect inflation to subside as a series of interest rate increases take hold. In their most recent economic projections, policymakers said they anticipate inflation including food and energy prices to decline to 2.5% in 2024.

The current one-year outlook is down from 6.6% from the same time in 2022, but is running well ahead of the Fed’s 2% inflation goal. Expectations on a three- and five-year horizon were little changed, at 2.8% and 2.5%, respectively.

Consumers expect gas prices to rise by 4.6% in the year ahead, slightly less than the February outlook, and they see food prices up 5.9%, which was a decline of 1.4 percentage points from last month’s survey.

At the same time, consumers see their access to credit diminishing.

I think we can avoid a recession, says Allianz advisor Mohamed El-Erian

Those reporting that credit is much or somewhat harder to get than a year ago rose to 58.2%, the highest ever in a data series that goes back to June 2013. Likewise, the expectation that credit will be more difficult to get a year from now rose to nearly 53%, up from 48.8% in February.

The outlook for missing a minimum debt payment in the next year rose by 0.3 percentage point to 10.9% of respondents.

The survey also showed less optimism about stocks, with just 35% expecting higher prices a year from now, down 1.4 percentage points on a monthly basis.

The results come as the Fed considers whether to continue raising interest rates or to go on hold when it meets again in May. Current market pricing sees a 69% probability of another quarter percentage point increase, according to the CME Group.

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