Credit score entry outlook hits document low, inflation expectations rise

A customer shops for eggs at a HEB grocery store on February 8, 2023 in Austin, Texas. Wholesale egg prices have fallen by more than 50% since record highs in December, according to data from Urner Barry.

Brandon Bell | News from Getty Images | Getty Images

Consumers are becoming more pessimistic about inflation and their access to credit, according to the results of a monthly survey released by the New York Federal Reserve on Monday.

Respondents expect prices to rise by half a percentage point in the coming year, an annual gain of 4.7%, according to the central bank industry survey of consumer expectations for March.

This is the first time the near-term outlook has risen since October and contradicts the narrative from Fed officials that they expect inflation to ease once a series of rate hikes take hold. In their latest economic forecasts, policymakers expect inflation, including food and energy prices, to fall to 2.5% by 2024.

The current one-year outlook is down from 6.6% at the same point in 2022, but is well above the Fed’s inflation target of 2%. Expectations for a three- and five-year horizon were little changed at 2.8% and 2.5%, respectively.

Consumers expect gas prices to rise 4.6% in the coming year, slightly less than expected in February, and they expect food prices to rise 5.9%, down 1.4 percentage points from the previous year last month’s poll.

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

Those who said credit is much or a little harder to come by than a year ago rose to 58.2%, the highest ever in a data series dating back to June 2013. Likewise, the expectation that credit will be harder to obtain a year from now rose to almost 53% from 48.8% in February.

The prospect of missing a minimum debt payment next year rose 0.3 percentage points to 10.9% of respondents.

The survey also showed less optimism about equities, with just 35% expecting higher prices in a year, down 1.4 percentage points on a monthly basis.

The results come as the Fed debates whether to continue raising rates or wait at its next meeting in May. Current market pricing sees a 69% chance of another quarter-point rise, according to CME Group.