A growing number of Americans are reaching financial breaking points as years of high inflation, rising living costs and a war-driven cost crunch strain household budgets, while the Federal Reserve keeps talking about “balanced” policy and “anchored” expectations. The people paying for this arrangement are the ones at the bottom: workers, renters, patients, and families trying to keep food on the table while prices, debt and gas keep climbing.
Kris Massey, a 57-year-old nurse practitioner, stood at a jeweler’s counter last month hoping to sell a couple of her grandmother’s gifted pieces to possibly cover some bills. Even though Massey makes six figures a year, her financial situation has grown untenable after years of fast-rising prices and a recent monthslong bout of unemployment. She worked two jobs from 2012 to 2023, but a second job is not an option after an extensive back surgery. Her retirement was drained when she was out of work. Massey said, “I’m just trying to hang on.”
Who Pays for the Price System
The CNN report said a closely watched gauge of consumer sentiment fell to an all-time low this month, with Americans feeling worse about the economy than they did during the Vietnam War, the 1970s oil crisis, 9/11, the Great Recession, the Covid-19 pandemic and the inflation burst that followed. It said bankruptcy filings have increased for the past three years, debt levels have grown, delinquency rates have moved higher and the personal savings rate is at its lowest in more than three years. It also said everyday goods and services are up about 25% since 2021.
Lower-income households are disproportionately impacted because a larger share of their earnings goes toward basic needs like groceries and gas. David Ortega, a food economics professor at Michigan State University, said that as higher-income shoppers trade down from premium brands to cheaper alternatives, demand for lower-cost goods rises. Ortega said, “If you were someone who was buying the conventional product, you don’t have anything to switch down to.”
The CNN report also quoted David Michael Tinsley, senior economist at the Bank of America Institute, saying consumer spending was running at a 4% annual growth rate in April, even with gasoline stripped out. Tinsley said, “That’s the fastest growth in over three years,” and said it was fueled in part by higher tax refunds and the persistence of a K-shaped economy. He said the gaps between higher-income wage growth and middle- and lower-income wage growth are the largest in the Bank of America data, which goes back about 10 years. After-tax wage growth for higher-income households above $130,000 is running at 6% annually versus 1.5% for lower-income households below $70,000 and 2.3% for middle-income households between $70,000 and $130,000. The gap in spending growth is less stark but still the widest in three years, he said.
Food Insecurity and the Quiet Collapse
Another CNN report said there has been a “remarkable” increase over the past few years in Americans struggling to put food on the table, and that this is likely contributing to record-low consumer sentiment readings, according to new Federal Reserve Bank of New York research released Wednesday. The New York Fed updated a 2020 analysis with newly collected data from its Survey of Consumer Expectations. Researchers found that a greater share of Americans have become more “food insecure” than they were in May and June of 2020 and are dipping into savings to cover expenses, struggling to access food, have kids who missed meals, or are receiving food donations or federal nutrition assistance. The researchers wrote, “We find a remarkable increase in food insecurity, particularly among lower-educated and lower-income households and households with young children.”
The New York Fed said those same groups also reported increases in pessimism regarding their financial well-being. It said the association between rising food insecurity and increased pessimism points to a potential explanation for why U.S. consumer sentiment has been in the dumps despite economic data remaining fairly resilient, if not quite strong. In February 2026, 10% of households surveyed said they didn’t have enough food, up from 4% in June 2020. Shares of people receiving food donations increased to 15.8% from 10.6%, SNAP participation rose to 17.9% from 10.6%, and more than one-third of respondents used their savings to cover expenses, 36.8% versus 21.8%. The survey data was gathered before the U.S.-Israeli strikes in the Middle East that later resulted in an oil supply crunch and a spike in gas prices.
A separate CNN report said Sian Slater, 59, has multiple jobs in the Phoenix metro area, where driving is her only option to get to her job at a big-box retailer or to her graveyard shift at a shipping company. Spiking gas prices have already eaten into her budget. A gallon of the premium gas her car requires now costs about $5.50, compared with below $4 before the U.S.-Israeli war with Iran, she said. The commercial cleaning business she started has lost a couple of clients who had to curtail expenses. She has halted automatic contributions to her retirement, canceled doctor’s appointments and cut grocery items. Slater said, “At the end of the week with the price of fuel added, I have roughly $15 a week to buy groceries and medications.” She said she has had to cancel upcoming medical appointments because she cannot afford the copays and added, “But right now, I’m feeling very poor, and I’ve never felt that way before.”
What the Central Bank Calls Stability
Bloomberg reported that grocery prices are poised to rise further because of weather-related supply issues, tariffs and a shrinking cattle herd, signaling renewed inflationary pressure at the consumer level. Reuters reported that supply shocks and debt may threaten central bank independence, suggesting political incentives to favor short-term relief over disciplined long-term policy.
CNBC reported that Minneapolis Federal Reserve President Neel Kashkari said Thursday that bringing down inflation in the U.S. remains his top priority and that consumer prices are still “much too high.” Kashkari said the U.S. central bank would continue taking a “balanced approach” to its dual mandate of price stability and full employment. He said inflation has remained above the Federal Reserve’s 2% target for more than five years, while the labor market is in “decent shape” right now.
Kashkari said, “I am focusing heavily on inflation. I’m not ignoring at all the labor market. We need to pay attention to both sides, but the labor market is in decent shape right now, while inflation is simply much too high.” He added that the longer inflation remains elevated, the greater the risk that inflation expectations become unanchored and move higher. He said, “If that were to happen, then we’d have to respond even more aggressively, so we’re much better off doing what we need to do to keep inflation expectations anchored.” CNBC said U.S. headline inflation most recently stood at 3.8% in April, while excluding food and energy, core CPI increased 0.4% and 2.8%, respectively. Kashkari said global inflationary pressures have been fueled by the Covid-19 pandemic, tariffs, the war in Ukraine and now the conflict in Iran. He said the current surge is due to energy and fertilizer prices and that he will be looking for when energy prices affect the broader economy and inflation in the broader economy.
Kashkari was also asked about artificial intelligence and said that if AI leads to sustained higher productivity, higher rates could be sustained as the economy is so productive. He said the impact is currently hard to judge and that it is too soon to know the short-term or long-term implications for monetary policy. CNBC said the remarks come as the Fed begins a new chapter under Chair Kevin Warsh, who succeeded Jerome Powell. Kashkari said he has known Warsh “for a long time” and welcomed a fresh discussion about how the Fed communicates with markets and the public. He said, “I don’t love the fact that I have to fill out the dot plot, because the future is so uncertain.” He said some suggested solutions include presenting multiple economic scenarios or producing the dot plot only when they are “really trying” to give forward guidance to the market. Kashkari said, “Forward guidance can be a very powerful tool for central bankers. There are few moments when I really want to deliver that guidance. Most of the time, I’d rather not deliver such guidance, just because the future is uncertain, and so I think this is an example of an area that is ready for a fresh discussion of all of these options.”