Why are consumers pessimistic about the economy while inflation is cooling?
Former Bank of America Vice Chair Keith Banks on the state of inflation, the earnings period and the September PCE release on ‘Mornings with Maria.’
Inflation hit the highest level in four decades a little more than two years ago, and while it has cooled substantially since then and the labor market has remained resilient despite high interest rates, American consumers are still feeling squeezed by it.
The economy is the top issue for voters as they cast their ballots ahead of Election Day on Tuesday, and while pocketbook concerns are often at the forefront of voters' minds, that's particularly true in the wake of a historic inflationary cycle that hit the economy in recent years.
Inflation surged to a 40-year high of 9.1% on an annual basis in June 2022 in the wake of pandemic-related supply chain disruptions and an influx of federal spending on relief programs. Though it has since ebbed to 2.4% in September and the labor market has remained solid amid the Federal Reserve hiking interest rates to slow the pace of inflation, prices are still about 20% higher than they were four years ago.
Gregory Daco, chief economist for EY-Parthenon, told FOX Business that the disconnect between the improvement in economic measurements of inflation and Americans' assessment of the economy overall is based on their assessment of price levels for items they purchase day-to-day compared to years past.
FED'S FAVORED INFLATION GAUGE SHOWED PRICE GROWTH CONTINUED TO SLOW IN SEPTEMBER
Overall prices are about 20% higher than they were four years ago after inflation surged to the highest level in four decades in recent years. (Howard Schnapp/Newsday RM via Getty Images / Getty Images)
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