Household financial worries at highest level since 2022, New York Fed says
A New York Fed survey found households felt worse about their finances, even as inflation expectations were mostly unchanged.
Intelligence analysis by GPT-5.4 Mini
The New York Fed's May survey showed a sharp rise in households saying their finances are much worse than a year ago, the highest since July 2022. Inflation expectations barely moved, but consumers still see weaker conditions ahead.
A big bank survey found more families feel their money situation is getting worse, like a backpack that feels heavier each month. Prices people expect to pay did not jump much, but many still feel squeezed.
Analysis
Household sentiment weakens
The Federal Reserve Bank of New York's monthly Survey of Consumer Expectations showed U.S. households grew more worried about their financial situation in May. The share saying their current situation was "much worse" than a year earlier rose to 13.3%, up 2.7 percentage points from April and the highest level since July 2022.
Broader outlook also softened
The share of respondents saying their situation was either much worse or somewhat worse than a year ago reached 43.7%, the highest since January 2023. Looking ahead, 36% expected their situation to be worse over the next year, while 22.9% expected improvement. The gap between better and worse expectations fell to its lowest level since October 2022, according to the New York Fed.
Inflation expectations stayed steady
Despite worries about household finances, the survey did not show a broad jump in inflation expectations. The one-year inflation outlook rose only 0.1 percentage point to 3.5%, while the three-year and five-year views stayed at 3.1% and 3%. Gasoline expectations dipped to 5%, while food rose to 5.8% and rent to 7.4%.
Market and policy backdrop
The report comes as consumers worry about the inflationary effect of the Iran war, which has pushed energy prices higher. The article notes that some Federal Reserve officials have warned that a prolonged conflict could lift inflation expectations. The next major test comes Wednesday with the consumer price index for May, followed by the Fed's interest-rate decision on June 17. Markets are pricing in almost no chance of an immediate rate cut and have started to see a possible quarter-point hike by year-end.
Key points
- The share of households saying their finances are much worse than a year ago rose to 13.3%, the highest since July 2022.
- The total seeing their situation as much or somewhat worse reached 43.7%, the highest since January 2023.
- One-year inflation expectations edged up only 0.1 percentage point to 3.5%, while longer-term views were unchanged.
- Consumers expect spending growth to slow to 5% over the next year.
- Markets are focused on Wednesday's CPI report and the Fed's June 17 rate decision.
If inflation expectations stay anchored, the Fed may avoid having to react aggressively to a temporary shock. That could help keep borrowing costs from rising further and give households and businesses more stability.
If families keep feeling worse about their finances, spending could slow and weigh on company sales. If energy-driven inflation worries spread, the Fed could stay tighter for longer or even face pressure to raise rates.
