US consumer sentiment plunges on tariff fears, inflation expectations jump

The deterioration in sentiment and inflation expectations reported by the
That mirrors similar concerns in some business surveys. The uncertainty created by Trump's on- and off-again tariffs as well as an escalation in trade tensions risks derailing the economic expansion. Fears of higher prices, which drove consumers' long-term inflation expectations to levels last seen in early 1993, create a challenge for Federal Reserve officials as they consider the next steps for monetary policy.
"The jury is back and the verdict is in. Trump 2.0 policies are harming the economy and the future prosperity of America," said
The index has erased all the gains posted in the aftermath of Trump's election victory in November.
The weakness in sentiment this month reflected a deterioration in expectations for the future across multiple facets of the economy, including personal finances, employment, inflation, business conditions and the stock market.
Republicans recorded a 10% drop in their expectations index, while Independents saw a 12% decrease. Expectations among Democrats tumbled 24%.
"Consumers from all three political affiliations are in agreement that the outlook has weakened since February," said Surveys of Consumers Director
TARIFF WHIPLASH
Trump has slapped a raft of tariffs on a wide range of goods from key trade partners like
Trump on Thursday threatened to hit
Tariffs were mentioned by 48% of the survey's respondents and were expected to push up prices in the future. Consumers' 12-month inflation expectations jumped to 4.9%, the highest level since
Over the next five years, consumers saw inflation running at 3.9%. That was the highest reading since
"Unlike during the pandemic when consumers largely understood the price spikes to be short-lived, it is increasingly evident in the data that consumers see the price pressure today as longer lasting," said
Stocks on
Fed officials meeting next week are expected to leave the U.S. central bank's benchmark overnight interest rate in the 4.25%-4.50% range, having reduced it by 100 basis points since September, and continue to assess the economic impact of the Trump administration's policies.
Financial markets expect the Fed to resume cutting borrowing costs in June after it paused its easing cycle in January amid a darkening economic outlook.
Economists said it would be hard for policymakers to ignore the persistent rise in inflation expectations.
"Fed officials have argued that as long as inflation expectations remain anchored, tariffs can probably be viewed as having a one-off impact on prices rather than being part of an inflation process," said
"This view does not look credible based on these data."
The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
Pressure on consumers is also coming from an unprecedented campaign to drastically shrink the government through tech billionaire
A Reuters/Ipsos poll of Americans conducted
Though the correlation between consumer sentiment and spending has generally been weak, economists said the magnitude of the deterioration in morale was concerning.
"The pullback in confidence is becoming a real threat to consumer spending," said
(Reporting by Lucia Mutikani; Editing by
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