Americans at Odds Over Trust in Federal Reserve as Interest Rate Decision Looms

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The Federal Reserve has been aggressive in moving to address high inflation, having increased interest rates 11 times since March 2022. Recent economic data suggest that the central bank may hold off on another rate hike at its upcoming meeting in two weeks. Federal Reserve Governor Christopher Waller points toward a “wait and see” approach to assess whether the trend of cooling inflation continues while also expressing a belief that a future rate hike will not trigger a recession.

Americans appear to be divided when it comes to how much they trust in the Federal Reserve’s management of inflation and interest rates. Fresh CivicScience polling finds a slim majority of 51% hold at least a ‘medium’ amount of trust in the Fed’s approach with 14% saying they hold a ‘high’ level of trust. Forty-nine percent, meanwhile, have little to no confidence in the central bank – 18% say they have none at all.

These findings also highlight a distinct political divide in perspectives. Just 8% of those identifying as Republican have a ‘high’ level of trust in the Fed, compared to 23% of Democrats and 11% among Independents. Conversely, Democrats are much less likely to say they have no trust whatsoever.

While trust in the Federal Reserve may be divided, its upcoming interest rate decision will drive consumer spending behavior. If the Fed refrains from raising interest rates this month, repaying credit card debt is the top priority (63%) for consumers to fast-track (excluding those answering ‘does not apply’). Mortgage payments and other debts follow (53%) not far behind. Opening a new line of credit or home equity (68%) and taking out a student or personal loan (66%), on the other hand, are each more likely to be postponed should interest rates remain at their current levels.

Finally, there is some optimism in the financial sector that a recession may no longer be imminent. American consumers, however, don’t feel quite as optimistic. Ongoing CivicScience tracking finds that although the number of Americans who believe the U.S. is currently in a recession has dropped to 33% (from a peak of 45% in September 2022), roughly one-quarter now believe a recession is looming in the next six months – a four-point increase over last month. This rise also coincides with a month-long slump in consumer sentiment.

Curious to know more about inflation and how the ups and downs of the current economic client might impact your consumers? Don’t be caught in a wait-and-see holding pattern. Book a meeting with CivicScience today to stay ahead of the latest trends.