Pessimism About Inflation, Credit Increased in March

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Key Takeaways

  • Participants in the latest Survey of Consumer Expectations by the New York Fed foresaw an uptick in inflation over the next year.
  • Consumers' perceptions about access to credit also hit an all-time low in the March 2023 survey.
  • The recent turmoil in the banking sector may have contributed to the pessimistic results.

Americans anticipated in March that the rate of inflation would rise over the next year, the only time that has happened in the past five months, according to the New York Federal Reserve's latest survey of expectations. In addition, consumers' views on the ability to get credit hit an all-time low. 

The New York Fed's March Survey of Consumer Expectations showed that the median expectation for inflation a year from now rose 0.5 percentage point to 4.7%, the first upturn since October. Expectations three years from now moved up 0.1 percentage point to 2.8%, while the outlook five years from now declined 0.1 percentage point to 2.5%.

For the year ahead, anticipated price growth eased 0.1 percentage point for gas to 4.6%, 1.4 percentage points for food to 5.9%, 0.1 percentage point for medical care to 9.3%, and 0.2 percentage point for rent to 9.2%. The respondents believed that college costs would jump to 8.9%, 0.8 percentage point higher.

Credit Tightening

Perceptions of access to credit fell from 2022, with the share of households indicating that it is harder to get credit now than a year ago rising to a record high. In addition, those who said they expect it will be more difficult to obtain credit a year from now also increased. 

Those results may have been fueled by the recent collapse of Silicon Valley Bank and Signature Bank, amid concerns that the bank woes could lead to tighter restrictions on borrowing.

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  1. Federal Reserve Bank of New York. "Short-Term Inflation Expectations Increase; Credit Access Perceptions and Expectations Deteriorate."

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