Consumer prices rose 2.9% over the previous 12 months ending in July, constituting the smallest annual increase since April 2021, according to the Consumer Price Index’s latest figures. Though inflation has continued to decline, researchers at the Boston Fed concluded it will take time for the initial shock of inflation to wear off, particularly for low-income households and people who’ve experienced a recent job loss. 

Besides relying more on credit cards, the Boston Fed said consumers were taking other measures to cut costs. Per its report, consumers have reduced their spending by eating less restaurant food, canceling subscriptions, purchasing less fresh produce and meat and switching to generic products. Survey respondents also reported contributing less to their savings, working more, moving to less expensive housing and delaying significant purchases, according to the Boston Fed’s report.

“Concern [about] future price increases has decreased over the past few years – but not by as much as we may have anticipated, given how much inflation has come down,” said co-author Michael Evangelist, a senior policy analyst at the Federal Reserve Bank of Boston’s regional and community outreach department.

As consumers turn to their credit cards to afford their purchases, the Federal Reserve has also tracked the rise in credit card debt balances. In Q2 2023, credit card debt surpassed $1.03 trillion, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data. A year later, in the second quarter of 2024, credit card balances reached $1.14 trillion.

By Lynne Marek on Aug 26, 2024
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