Outlook for credit access to record low as inflation expectations jump, NY Fed survey shows

Consumers are getting more pessimistic about inflation and credit availability, according to a survey released Monday by the New York Federal Reserve.

Respondents expect prices to rise by half a percentage point in the coming year, equivalent to an annual gain of 4.7%, the Central Bank of India’s March survey of consumer protections showed.

That’s the first time since October that the near-term outlook has risen and a series of interest rate hikes has contradicted the narrative of Fed officials who expect inflation to ease. In their latest economic forecast, policymakers said they expect inflation, including food and energy prices, to slow to 2.5 percent in 2024.

The current one-year outlook is down from 6.6 percent for the same period in 2022, but is running ahead of the Fed’s 2 percent inflation target. Expectations for the three- and five-year horizons were little changed at 2.8% and 2.5%.

Consumers expect gas prices to rise 4.6% next year, slightly lower than February’s outlook, and food prices to rise 5.9%, down 1.4% from last month’s survey.

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

Those reporting that it was very or somewhat difficult to get credit a year ago rose to 58.2%, the highest in the data series dating back to June 2013. It increased to about 53% from 48.8% in February.

The perception that there will be a minimum debt payment next year rose by 0.3 percentage points to 10.9% of respondents.

The survey also showed optimism about stocks, with just 35% now expecting higher prices this year, down 1.4 percentage points month-on-month.

The results come as the Fed considers whether to continue raising interest rates or leave them on hold when they meet again in May. The current market price of 69% sees the possibility of another quarter percentage point increase, according to CME Group.