New York Fed Survey Reveals Heightened Credit Crunch Concerns at Record 10-Year High

A recent survey released by the New York Federal Reserve reveals that American consumers are increasingly concerned about their access to credit. With persistently higher interest rates and stricter lending standards at banks, nearly 60% of respondents claim that getting loans, credit cards, and mortgages has become more challenging compared to a year ago. This is the highest level recorded since June 2013, according to the New York Fed’s Survey of Consumer Expectations for August.

These worries about credit access have been steadily rising since early 2022, coinciding with the Federal Reserve’s decision to raise interest rates. Over the past year, the central bank has increased its key borrowing rate by 5.25 percentage points in an effort to control inflation.

While the Federal Reserve focuses on combating inflation, the survey reveals mixed expectations regarding inflation rates. Expectations for inflation over one and five years have only increased by 0.1 percentage point, reaching 3.6% and 3% respectively. Meanwhile, the three-year outlook decreased by 0.1 point to 2.8%. It’s worth noting that the Federal Reserve’s inflation target is 2%.

However, respondents’ expectations for commodity inflation differ significantly. According to the survey, expectations for gas prices have risen by 0.4 percentage point to 4.9%, medical care by 0.8 point to 9.2%, food by 0.1 point to 5.3%, and college education and rent by 0.2 point each, reaching 8.2% and 9.2%, respectively.

Furthermore, concerns about employment are also increasing. The survey indicates that the mean expectation of losing one’s job in the next year has risen by 2 percentage points to 13.8%, the highest level since April 2021. This is particularly significant considering the current unemployment rate of 3.8%, which is only 0.1 percentage point higher than the rate a year ago.