Following Donald Trump’s victory in the November presidential election, household financial optimism reached a multiyear high, according to a New York Federal Reserve survey issued Monday.
In a survey of about 1,300 heads of households, the central bank found that 37.6% of households said they expected their financial circumstances to improve in a year. This is an increase of roughly 8 percentage points from October. Since February 2020, right before the Covid-19 epidemic struck, that reading was the highest.
Alongside the increase in optimism, the percentage of people who believe their financial circumstances will worsen dropped to 20.7%, the lowest since May 2021 and down almost 2 percentage points from a month ago.
The outcomes come after Trump’s victory on November 5, which will return him to the White House for a second term that is not consecutive. To spur economy, the Republican has pledged a series of deregulation and tax cuts.
Despite the macro economy’s strong growth through 2024, price hikes continue to impede consumers, causing the consumer price index inflation gauge to rise by more than 20% overall under President Joe Biden.
The New York Fed Survey indicates that consumers’ inflation outlook remains cautious despite the improvement in sentiment.
Expectations for inflation rose by 0.1 percentage points for the one-, three-, and five-year periods, reaching 3%, 2.6%, and 2.9%, respectively. When the Fed meets next week, it is still anticipated to cut its benchmark interest rate by a quarter percentage point, even if it wants inflation at 2%.
The outlook for the government’s debt and deficit load also improved, despite Trump’s lack of discussion of it. The consensus forecast for government debt growth was 6.2%, the lowest since February 2020 and a decrease of 2.3 percentage points from October.
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