Household finance expectations reach highest levels since February 2020 after Trump's victory

Optimism about household finances reached its highest levels in years after Donald Trump won the presidential election in November, according to a survey conducted by the Federal Reserve Bank of New York on Monday.

The central bank's survey, which included about 1,300 household heads, showed that families who expect their financial situation to be better a year from now jumped to 37.6%, an increase of about 8 percentage points from October. This was the highest reading since February 2020, just before the outbreak of the Covid-19 pandemic.

In conjunction with the rise in optimism, the level of those who expect their financial situation to deteriorate fell to 20.7%, a decrease of about two percentage points from last month and the lowest since May 2021.

The results come after Trump's victory on November 5, which will return him to the White House for a second non-consecutive term. The Republican has promised a list of low taxes and deregulation to boost growth.

Although the overall economy has shown strong growth through 2024, consumers remain stymied by price increases that have spurred a cumulative increase in the CPI's measure of inflation of more than 20% under President Joe Biden.

Even with sentiment increasing, consumers' inflation expectations remain cautious, according to the survey conducted by the Federal Reserve Bank of New York.

Inflation expectations over one, three and five years increased by 0.1 percentage point, rising to 3%, 2.6% and 2.9%, respectively. The Fed is targeting inflation at 2% but is still expected to cut its benchmark interest rate by a quarter of a percentage point when it meets next week.

Although Trump has made little reference to attacking the government's debt and deficit burden, the outlook there has also improved. The average forecast for government debt growth was 6.2%, down 2.3 percentage points from October and the lowest level since February 2020.