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Americans are losing confidence fast. Consumer sentiment just plunged to 50.8 in early May, dropping from 52.2 in April, based on new data from the University of Michigan.  That makes this the second-lowest reading ever, only beaten by the collapse in June 2022. People across the country are blaming one thing: tariffs. They see them as the main reason prices are still going up—and they’re not wrong. Nearly 75% of the respondents in the survey mentioned tariffs without even being asked, a huge spike from 60% the month before. The university’s survey director Joanne Hsu said clearly that uncertainty around trade policy is dominating how Americans view the economy.  This wave of fear started spreading before the US and China hit pause on most tariffs in early May. That 90-day pause came after the majority of responses were collected, meaning it didn’t help shape this grim result. People were already bracing for the worst. Consumers now expect inflation to get worse, not better Inflation expectations are rising again—and fast. The survey showed that Americans expect prices to jump 7.3% over the next year, up from 6.5% in April. That’s the highest one-year outlook in months. Long-term inflation projections also crept higher, hitting 4.6% from 4.4%. These expectations are bad news for the Federal Reserve, which keeps a close eye on them when deciding what to do with interest rates. Jerome Powell, Chair of the Fed, has said that rate cuts won’t return unless the central bank is confident inflation expectations aren’t getting out of control. Right now, they clearly are. This puts pressure on Powell and the Fed to stay put for longer than Wall Street had hoped. The next update to the sentiment index comes May 30, and all eyes will be on whether the tariff pause makes any…

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Filed under: News - @ May 16, 2025 3:25 pm