Consumers see debt delinquency risk rising, higher long-term inflation: NY Fed

Last month, U.S. consumers' expectations about the risk of debt default rose to the highest level in more than four years, while concerns about higher inflation over the long term also grew, according to a report released Tuesday by the New York Fed. .

In its September Consumer Expectations Survey, the New York Fed's Microeconomic Data Center found that the average probability of a consumer not earning a minimum income is debt payment It rose for the fourth consecutive month to 14.2%, the highest level since April 2020 when it reached 16.1%.

This suggests that some Americans are facing increasing budget pressures as they try to manage their borrowings. At the same time, consumer perceptions and expectations for credit access improved for the fourth consecutive month in September.

For consumers inflation expectations The following year the proportion remained unchanged at 3%, but increased from 2.5% to 2.7% after 3 years and from 2.8% to 2.9% after 5 years.

The inflation rate, which the Fed was closely monitoring, fell to 2.2% in August.

The probability is losing one's job The employment rate over the next 12 months was flat in September compared to August, but the probability of voluntary redundancy rose from 19.1% in August to 20.4% in September, the highest level since July. It became.

expectations high unemployment rate One year from now, respondents have a 36.2% chance of being close to the 2024 low, slightly higher than February's 36.1%.

The New York Fed's report comes as the central bank considers how to proceed with rate cuts. Fed policy makers In September, the benchmark federal funds rate was lowered by 50 basis points from a range of 5.25% to 5.5% to 4.75% to 5% as the pace of inflation continues to slow.

Inflation rate rose 2.4% in September, higher than expected

The Federal Reserve Bank of New York said it believes the risk of consumers defaulting on their debt payments has increased for the fourth consecutive month. (Photo by Spencer Pratt/Getty Images/Getty Images)

The Labor Department's Consumer Price Index (CPI), a commonly used measure of inflation, slowed to 2.4% in September, closer to the Fed's 2% target but still higher than LSEG economists expected. After this inflation cycle reached a 40-year high of 9.1% in June 2022, inflation has gradually cooled in recent years.

Federal Reserve President Christopher Waller said Monday that recent data doesn't show that. us economy “We don't want to overreact or scrutinize this data, but the data taken together suggests that monetary policy should proceed more cautiously in the pace of rate cuts than was necessary at the time of policymaking. I think that suggests that,” he added. September meeting. ”

US economy added 254,000 jobs in September, much more than expected

Federal Reserve President Christopher Waller on Monday warned against further interest rate cuts, saying the U.S. economy had not slowed significantly. (Photographer: Bess Adler/Bloomberg via Getty Images / Getty Images)

The market is currently pricing in a 25 basis point rate cut from the Fed at its next meeting, which would bring the benchmark down to a range of 4.5% to 4.75%. interest rate trader According to the CME FedWatch tool, there is a 94.1% chance that the Fed will cut rates significantly next month, and a 5.9% chance that rates will remain unchanged.

Economic data released over the past two weeks, including the CPI data and a better-than-expected September jobs report, dampened market expectations for more aggressive rate cuts at the November Fed meeting. A month ago, traders thought there was a 27% chance that interest rates would be cut another 50 basis points in November, to a range of 4.25-4.5%, according to CME FedWatch.

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The Fed's next policy meeting begins the next day. election day and will run from November 6th to 7th.

Reuters contributed to this report.