2023-06-15 19:40:19
Although the inflation rate slowed to four percent in May, its lowest level in two years, Americans’ saving habits seem to have been affected by continuing to raise interest rates for ten consecutive times since March 2022, in a sign of a looming economic recession. .
According to the “How America Saves” report from the “Vanguard” investment company, the average account balances of the participants, who reach five million participants with an average age of 43 years, have decreased by 20 percent since the end of 2021, mainly driven by the decline in the stock and bond markets over the past year. general.
The numbers look worse if we consider the average balance, which was just $27,376 last year, compared to $35,345 in 2021.
The report found that 2.8 percent of respondents had withdrawn or borrowed money due to economic hardship, the highest percentage since 2018.
The report indicated that a third of the withdrawals were to avoid foreclosure or eviction from the home, and about another third were due to medical expenses.
Certified financial planners often recommend that people start saving early in their careers, until their savings habits change, and that they set aside 12 percent to 15 percent annually of their pre-tax income for savings.
Federal Reserve Chairman Jerome Powell stressed that the bank will continue to fight inflation, despite holding interest rates, for the first time in 15 months.
“If the economy grows as expected, the average federal interest rate will be at 5.6 percent by the end of this year,” he said, ruling out a rate cut this year.
He added that it would be appropriate to cut interest rates at a time when inflation is dropping significantly, which he sees within a few years from now, but the Federal Reserve has not succeeded in curbing inflation to about 2 percent, as it is currently twice its target, according to the index report. consumer prices for May, but the current rate represents a significant improvement over last year, when inflation peaked at 9 percent year-on-year.
(Jane Sahadi – CNN)
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