US Consumer Confidence Hits 12-Year Low Amid Inflation Fears

Consumer confidence in the US has reached a 12-year low due to rising inflation, higher borrowing costs, and job anxiety. According to the Conference Board, consumers' median expectations for inflation over the next 12 months rose to 5.1%, while the share of households anticipating higher interest rates surged to 68.4%. Heather Long, chief economist at Navy Federal Credit Union, said that 'consumers are more disgruntled and squeezed in this economy than they felt during the 2020 pandemic.' The Main Street economy is under strain, with high gas prices, spiking borrowing costs, and low hiring hitting middle-class households hard.

New York Federal Reserve President John Williams predicts that inflation will end 2026 at 3.5% and slow to just above 2% next year before hitting the Fed's 2% target in 2028. He also expects unemployment to edge down from 4.1% to 4% during the coming year. However, traders in interest rate futures cut the odds of another rate hike on October 28 from 71% to 47%, following Williams' speech and the release of the consumer confidence survey.

The Conference Board's index fell 6.7 points this month to 81.8, while the University of Michigan found that consumer sentiment dropped to a four-month low due to persistent price pressures. Expectations for inflation in both the short and long term rose amid concerns about high fuel prices and re-flaring trade disputes.