According to a Federal Reserve report released on Monday, the inflation wave that peaked at a 40-year high last year and is still high has reduced households’ sense of financial security in the United States. Many people said they had cut back on their savings to make ends meet, felt less confident about their retirement, and had postponed purchases or switched to cheaper items while shopping.
The Fed reported that in 2022, the percentage of respondents who said they were doing “at least okay financially” fell by 5 percentage points, the most since the survey’s inception ten years prior, to 73%, in an annual study illustrating the damaging impact of inflation on Americans’ economic confidence. The year prior, it had reached a record high.
The percentage of those who claimed to be in a worse situation increased 15 points to 35%, which is by far the largest level recorded since the Fed began asking the question in 2014. The “Survey of Household Economics and Decisionmaking” was introduced by the Fed in 2013.
Among those who aren’t yet retired, the percentage who said their retirement savings were “on track” decreased to 31% from 40% in 2021.
The survey also indicated that Americans’ deteriorating mood about their individual money extended over to their assessment of the national economy, with a 2024 presidential campaign already in its early stages.
Only 18% of respondents, down from 50% in 2019, evaluated the country’s economy as “good” or “excellent,” despite the fact that the unemployment rate has been low, below 4%, since January 2022.
The poll was carried out in October, and a sample size of 11,775 persons provided replies for the study.
As the economy recovered from the pandemic-era restrictions placed on many governmental and commercial operations the year before, inflation became a major issue for the United States in 2021.
The Consumer Price Index, which tracks annual inflation, reached a high of 9.1% last summer, the highest level since the early 1980s, and it is still high today at 4.9%. In response, Fed officials swiftly increased interest rates and frequently reaffirmed their commitment to using all available tools to tame inflation.
54 percent of adults reported that price hikes had “a lot” of an impact on their household budgets, with parents of children under 18 and those of colour, those from Latin America, and people with disabilities being among those most likely to report such an impact.
In fact, a third of households overall mentioned inflation as their biggest financial challenge, an increase of more than four times from 2016.
Fewer households believed they would be able to cover an unexpected $400 bill with cash or an equivalent, like a credit card expected to be paid in full at the next statement, according to a question designed to gauge their ability to handle a moderate financial emergency. Sixty-three percent, down from a record-high 68% in 2021, indicated they would pay for such a bill with cash.
The survey’s assessments of household earnings and respondents’ perceptions of the work market revealed that more persons received or requested wage raises or promotions last year.
(Adapted from NYPost.com)
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