Credit Sesame’s personal finance weekly news roundup June 17, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.
- Fed holds firm but signals more rate hikes to come
- Consumer price increases cool down
- Scammers use fake fraud alerts to dupe consumers
- Consumers see credit access tightening
- Homeownership by gender is changing for single homeowners
- Credit problems are rising to pre-pandemic levels
- Definition of wealth changing according to study
- Higher earners most likely to be overly optimistic about retirement
1. Fed holds firm but signals more rate hikes to come
On June 14, the Federal Open Market Committee (FOMC) announced that it would maintain the Fed funds rate in a target range of between 5.0% and 5.25%. However, while holding steady for now, the FOMC released economic projections showing it expects the rate will rise to 5.6% by the end of this year. The official FOMC statement said it held steady rates to give the committee additional time to assess economic data. The committee’s projections suggest that it is concerned inflation will be more stubborn than initially expected. The year-end inflation projection is now 3.9%, up from a projection of 3.6% in March. In response, the Fed funds rate projection for the end of this year is now 0.5% higher than in March. Rate projections for 2024 and 2025 are each 0.3% higher than the March versions. See FOMC statement at FederalReserve.gov.
2. Consumer price increases cool down
The Consumer Price Index (CPI) rose by just 0.1% in May. That lowered the inflation rate for the past 12 months to 4.0%, the lowest since March 2021. The decline in the overall inflation rate was helped greatly by a steep drop in energy prices. The energy component of the CPI fell by 3.6% in May and by 11.7% over the past 12 months. However, other areas of inflation are proving more sticky. The core inflation rate, which excludes the food and energy sectors, was up 0.4% in May and 5.3% over the past 12 months. See full report at BLS.gov.
3. Scammers use fake fraud alerts to dupe consumers
The Federal Trade Commission (FTC) has issued a warning about scammers impersonating banks in text messages. The messages claim to warn the recipient about a possible fraudulent transaction. Responders are then contacted by scammers asking them for sensitive information. The FTC advises people not to click on suspicious texts. If you receive a message about a possible fraudulent transaction, check your account online through the bank’s main website to see if such a transaction is pending. If you need to call your bank, contact them using a telephone number you know and not via a number you receive in a text. According to the FTC, consumers lost $330 million last year to scams where somebody impersonated a bank. See article at BusinessInsider.com.
4. Consumers see credit access tightening
The latest Survey of Consumer Finances from the Federal Reserve Bank of New York showed that consumers find it more challenging to get credit than a year ago. They also expect credit access to continue to tighten over the year ahead. As for other aspects of the economy, consumers see inflation easing a bit. The median expectation for inflation over the next year is 4.1%. That’s the lowest inflation reading this survey has gotten since May 2021. Despite the expectation of easing inflation, consumers still don’t see their wages keeping up with rising prices. The median expected earnings growth for the next year declined to 2.8%. See details at NewYorkFed.org.
5. Homeownership by gender is changing for single homeowners
Single women are more likely than single men to own a home. According to a Pew Research Center analysis of recently-released U.S. Census data, 58% of single homeowners are women, while 42% are men. However, this is mainly because women comprise a larger percentage of older single households. Single people aged 65 and over are much more likely to own their homes than younger singles, and there are 6 million more households headed by single women in that age group than those headed by men 65 and over. While single women continue to maintain a home ownership edge over single men, the gap has declined through the years. Since 2000, women have gone from representing 64% of single homeowners to 58%. See analysis at PewResearch.org.
6. Credit problems are rising to pre-pandemic levels
Special financial assistance during the pandemic helped many American households get caught up on their debt payments. Since that assistance ended, credit problems have returned to their previous levels. Delinquency rates on credit card payments increased by 0.18% in the first quarter. That brings them closer to the pre-pandemic level of 2.85%. Meanwhile, net charge-offs have already soared past their pre-pandemic level. Charge-offs are payment amounts credit card companies have given up trying to collect. The percentage of net charge-offs jumped by 0.62% in the first quarter to 3.18%. That puts these problem accounts above their pre-pandemic level of 3.01%. See details at SPGlobal.com.
7. Definition of wealth changing according to study
A new Charles Schwab study measuring attitudes towards wealth found that Americans today believe it takes $2.2 million to be wealthy. And yet, 48% of poll respondents said they felt wealthy despite this group having an average net worth of just $560,000. One explanation for the disconnect is some people may feel wealthy if they are on track toward a sound financial future, even if they are not there yet. This may explain why older respondents were least likely to say they felt wealthy, despite having the highest net worth of any age group. Also, many respondents used a broader definition of wealth than financial worth. Other factors valued by respondents included health, work-life balance, relationships and low stress level. See full study at Schwab.com.
8. Higher earners most likely to be overly optimistic about retirement
A new analysis by the Center for Retirement Research at Boston College found higher earners are more likely to overestimate their retirement readiness than lower earners. While lower earners are at higher risk of being unable to support their lifestyles in retirement, they are more likely to recognize this risk than higher earners. Home values may be one reason higher earners tend to feel overly optimistic. Higher home values may give some an inflated sense of their wealth. See article at PlanSponsor.com.
