Dive Brief:
- Consumer confidence slumped this month to a 12-year low, eroded by rising prices for fuel, higher borrowing costs and anxiety over weak hiring by employers, the Conference Board said Tuesday.
- Consumers’ median expectations for inflation in 12 months rose 0.3 percentage points to 5.1%, the Conference Board said, and the share of households anticipating higher interest rates over the next 12 months surged 5.2 percentage points to 68.4%.
- “Consumers are more disgruntled and squeezed in this economy than they felt during the 2020 pandemic,” Heather Long, chief economist at Navy Federal Credit Union, said in a statement. “The Main Street economy is under strain. High gas prices, spiking borrowing costs and low hiring are hitting middle-class households hard,” she said.
Dive Insight:
New York Federal Reserve President John Williams on Tuesday said he saw no pressing need for the central bank to follow up its quarter-point increase in the main interest rate this month with another one at a scheduled Oct. 27-28 monetary policy meeting.
“With the policy action we took at our September meeting, there is no need for urgency, and we have time to gather more information,” he said in a speech.
“The accumulation of more data should provide greater clarity on the underlying trends in the economy and the associated risks to achieving our goals — and thereby the appropriate setting of monetary policy,” Williams said. He serves as vice chair of the central bank’s Federal Open Market Committee, which determines monetary policy.
Inflation will end 2026 at 3.5% and slow to just above 2% next year before hitting the Fed’s 2% target in 2028, Williams predicted. Unemployment during the coming year will edge down from 4.1% to 4%.
Slowing inflation is the central bank’s No. 1 priority, he said, while noting that “the overall economy is on a solid footing.”
Following the speech by Williams and release of the consumer confidence survey, traders in interest rate futures cut the odds that policymakers will increase the main rate on Oct. 28 to 47% from 71% on Monday, according to CME Group’s FedWatch tool.
The National Association for Business Economics found in a survey before the Fed’s meeting this month that 49% of its members believed monetary policy is too stimulative, a jump of 38 percentage points since a similar survey in February.
Nearly 95% of association members do not expect the Fed to curb inflation to 2% before the second half of next year, at the earliest, NABE said.
The view toward inflation among consumers is especially gloomy, Conference Board Chief Economist Dana Peterson said, citing write-in responses to the survey.
“References to prices, the high cost of goods and services, and oil and gas prices in particular, rose to new heights, reflecting September’s surge in fuel costs,” she said.
The confidence index fell 6.7 points this month to 81.8 from 88.6 in August, the Conference Board said.
The Conference Board survey tracked findings by the University of Michigan released on Friday.
Consumer sentiment fell this month to a four-month low and views of personal finances slumped about 10% amid mounting worries about persistent price pressures, the university said.
Concerns about high fuel prices and the re-flaring in U.S. trade disputes eroded household assessments of short-term business conditions, the university said. Expectations for inflation in both the short and long term inflation rose.
