Citigroup CEO Jane Fraser shared on Monday that consumer behavior is changing amid rising inflation, making life tougher for many Americans.
Fraser, who heads one of the biggest U.S. credit card companies, noted a split among consumers, describing it as a “K-shaped” trend. This means that while affluent individuals keep spending, lower-income Americans are becoming more careful with their money.
“We’re noticing a surge in spending among affluent customers in recent quarters,” Fraser told CNBC’s Sara Eisen during an interview.
However, Fraser also highlighted a more cautious approach from low-income consumers. “They’re feeling the pinch of rising living costs, which have gone up for them. So, even though there are job opportunities, they’re facing higher debt levels than before,” she explained.
This year, the stock market’s focus has centered on a crucial question: When will the Federal Reserve start reducing interest rates following a series of 11 increases? Strong employment numbers and ongoing inflation in certain sectors have complicated matters, pushing back expectations for when rate cuts might begin.
Consequently, Americans may have to deal with higher rates of credit card debt, auto loans, and mortgages for a longer period.
“We, like everyone else, are hoping for economic conditions that would prompt rates to drop sooner rather than later,” Fraser expressed.
However, Fraser acknowledged the challenge of achieving a “soft landing,” a term used when higher rates curb inflation without causing an economic downturn. “We’re optimistic, but achieving one is always tough,” she added.
