Inflation and interest rate hikes are negatively impacting Americans' financial well-being: survey

When it comes to building an emergency fund, 26% of Americans say they’ve made no progress.

As Americans grapple with high inflation and raised interest rates, their financial well-being has taken a toll, according to a survey by Morning Consult

"Consumers are slightly worse off now than at this time last year," Morning Consult said in its report. 

While recent economic concerns have affected Americans across income levels, higher income earners or those making more than $100,000 a year "have started to feel the pain of stubbornly high inflation" Charlotte Principato, Morning Consult’s lead financial services analyst, said in a statement.

On a point scale, high-income earners’ financial score has dropped from 59.52 in February 2022 to 57.07 in February 2023, Morning Consult’s analysis has found.  

"Compared with February 2022, members of high income households tend to be less sure that they could handle a major unexpected expense, less likely to have money left over at the end of the month and more likely to be behind on their finances," Morning Consult said in its report. 

But financial scores have dropped across income levels. All Americans averaged a score of 49.61 in February 2021. By February 2023, that score had dropped to 49.34.

When asked about personal financial goals, this is the percentage of Americans that said they have made no progress. 

  • Developing and maintaining a budget: 17%
  • Creating an emergency fund: 26%
  • Saving for retirement: 23%
  • Eliminating my debt: 18%
  • Purchasing a home: 21%
  • Saving for education: 17%

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Inflation is cooling, but remains a stressor for many Americans 

Inflation increased 5% year-over-year in March, a drop from its February increase of 6% and its June record of 9.1%, according to the consumer price index (CPI). However, inflation has remained a major stress trigger for many Americans, surveys have shown. In fact, 73% of Americans said they are stressed about their financial situation, according to a survey by Real Estate Witch. Plus, 74% of workers across the globe said inflation was the No.1 cause of stress in their lives, according to research by Fidelity Investments.

"Given all the stresses in the world today, such as natural disasters and geo-political events, Americans continue to confront challenging times in our economy," Kevin Barry, president of Workplace Investing at Fidelity Investments, said in a statement. 

And the course of inflation remains uncertain. Nearly half (46%) of Americans said they expected inflation to be worse in six months, according to a YouGov/The Economist poll published in November. Furthermore, 70% of Americans said recent levels of inflation have impacted their finances more than the COVID-19 pandemic, the Real Estate Witch survey said. 

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Will the Fed keep raising interest rates? 

To reduce inflation, the Federal Reserve has been increasing interest rates since 2022. Most recently, the Fed increased interest rates by 25 basis points in March, even after two major banks collapsed

But it's uncertain whether the Fed will keep raising rates. Still, the Fed moved forward with interest rate hikes after some economists had predicted the central bank would ease up economic policy following the collapse of Silicon Valley Bank and Signature Bank, which raised pressure and uncertainty in the banking industry. 

However, Fed Chairman Jerome Powell has hinted at lowering or even pausing interest rate hikes following concerns over the banking sector’s stability. 

"It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond," Powell said at a March press conference. "As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation."

Despite recent bank closures, most consumers are confident in the overall banking industry’s health. In fact, 84% of consumers said they didn’t move their money from their banks after the collapse of Silicon Valley Bank, Signature Bank and Silvergate Capital. 

"The share of Americans with trust in banks slightly increased in wake of the collapse of three regional banks in early March," Morning Consult said in its report. "A similar trend was true when it came to consumers’ trust in the nation’s 10 largest banks: Despite the tumultuous events, no bank saw a significant negative swing in trust. This proves that consumers were able to separate the actions of a few banks from the stability of the banking system overall."

Additionally, there may be a silver lining in the interest rate hikes, Morning Consult said. 

"Perhaps the one benefit to a rising interest rate environment is that banks can offer higher interest rates on savings accounts," Morning Consult said.

A high-yield savings account can pay around 2% APY.

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