Citigroup Consumer behavior has diverged as inflation in goods and services makes life more difficult for many Americans, CEO Jane Fraser said Monday.
Fraser, who heads one of the largest credit card issuers in the United States, said she sees a K-shaped consumer. This means that wealthy people continue to spend, while lower-income Americans are becoming more cautious with their consumption.
“A lot of the growth in spending in the last few quarters has happened with affluent customers,” Fraser told CNBC's Sarah Eisen in an interview.
“We're seeing a more cautious low-income consumer,” Fraser said. “They are feeling more pressure from the cost of living, which has been high and increasing for them. So, even though they have jobs, their debt service levels are higher than they were before.”
The stock market has hung on one question this year: When will the Fed start easing interest rates after a series of 11 hikes? Strong employment numbers and persistent inflation in some categories have complicated the picture, dampening expectations about when monetary easing will begin. This means Americans will have to live with higher rates of credit card debt, auto loans and mortgages for longer.
“I think, like everyone here, we hope to see economic conditions that will allow interest rates to fall sooner rather than later,” Fraser said.
“It's hard to have a soft landing,” the CEO added, using a term for when higher interest rates lower inflation without triggering an economic recession. “We're optimistic, but it's always hard to get one.”
