About 3 in 4 consumers say that rising inflation in the United States has hurt them financially, according to a new study.
A Bankrate survey conducted last month found that people of all ages and backgrounds have been feeling the pain of higher prices, with 74% of U.S. adults who have felt the effects of inflation reporting that they are now worse off financially. That number is up from the 66% who said they have been hurt financially by inflation when the survey was last conducted in July.
Consumer prices rose 7.5% in the 12 months ending in January, the fastest pace of inflation in four decades and a sizable half-percentage-point increase from December’s number. Inflation has been steadily increasing since President Joe Biden took office, with many economists attributing the higher prices, in part, to high levels of fiscal spending last year.
The negative effects of inflation are more pronounced for older people, the Bankrate survey found. There were major differences among perceptions of inflation between different generations and among different consumer categories.
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For instance, 94% of baby boomers (ages 58-76), reported experiencing the impact of higher grocery prices, compared to 89% of those in Generation X (ages 42-57), 72% of millennials (ages 26-41), and just 52% of Generation Z (ages 18-25).
As for gas prices, which have been rising steadily and even more recently have skyrocketed because of the war in Ukraine, nearly 9 in 10 boomers say they have felt the effects, while 79% of Generation X, 62% of millennials, and 47% of Generation Z said the same.
Bankrate senior industry analyst Ted Rossman ascribed the stark differences among age groups to both financial and psychological factors.
“One is that they’re more likely to be in retirement, or close to it, and are focused on drawing down their savings and investments rather than building them up,” he explained.
Rossman said the other factor likely at play is that older people have memories of the spiraling inflation that plagued much of the 1970s and early 1980s. During that time, there were periods of double-digit inflation and taming the higher prices became a major economic issue and top priority for the government. The current state of inflation is the worst that it has been since 1982.
Because of the country’s mounting inflation concerns the Federal Reserve is gearing up to hike interest rates for the first time in years. The first rate hike is expected next week after the Federal Open Market Committee meets.
The central bank plans to jack up interest rates several times this year. While some analysts had thought that the Fed would opt for an aggressive half-point hike right out of the gate next week, Fed Chairman Jerome Powell tamped down that speculation during a recent congressional hearing. He suggested that the rate hike would rather be a traditional quarter-point increase and the markets are now pricing that in as a near certainty.
“It’s clear that inflation, not higher interest rates, is the dominant kitchen table economics concern right now. This has major ramifications for consumers, the economy, politics, and more,” Rossman said.
The situation in Ukraine has complicated matters for the Fed, which must thread the needle of bringing down the higher prices while preventing the economy from going into a tailspin.
Mortgage rates have already risen to pre-pandemic levels in anticipation of the hikes as the Fed’s liftoff day approaches.
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The National Association of Realtors’s housing and commercial research director, Gay Cororaton, recently told the Washington Examiner that mortgage rates could push as high as 4.5% by the end of the year, which makes a big difference in terms of housing affordability.
On Thursday, new consumer price index numbers are set to be released. The consensus among economists is that inflation will accelerate even further from its current 7.5% level to 7.9% for the 12 months ending in February.
