Inflation is Americans' top economic concern
Ahead of the Fed's rate cuts, nine in ten Americans say they are concerned about rising prices, according to a new poll.
NEW YORK (CNNMoney.com) -- Americans are worried about the economy, and inflation tops their list of concerns.
Ninety-one percent of respondents to a recent poll said they are somewhat or very concerned about the rising rate of inflation, according to a national CNN/Opinion Research Corp. poll released Tuesday. And 86% said they are worried about jobs.
The results frame the issue facing the Federal Reserve, which is balancing the threat of recession against rising inflation and is widely expected to lower its key interest rate Tuesday.
"The Fed is definitely concerned, because these issues impact consumers," said Wachovia economist Sam Bullard.
Of the over 1,000 American adults surveyed in the poll conducted March 14-16, 65% said they are "very concerned" about inflation, and 26% said they are "somewhat concerned."
Although the latest Department of Labor survey showed that consumer prices didn't rise as much as investors feared in February, March's inflation figures are expected to be ugly. Gold and oil continue to hit record highs, as do gasoline prices, and the dollar has seen record lows against both the euro and 13-year lows against the yen.
But the poll also showed that unemployment concerns loom large, with 59% saying they are "very concerned" and 27% saying they are "somewhat concerned."
According to the Department of Labor, the United States has already lost 85,000 jobs so far in 2008, with February's net job report showing the worst loss in nearly five years.
But with the Fed expected to cut its key interest rate later Tuesday, consumer price concerns could be inflated.
The Fed began a series of cuts to its key interest rate in September, taking the rate to 3% from 5.25%. The central bank cuts rates in order to boost the economy and, in this round, to stave off a recession. But lower interest rates can also weaken the dollar, sending inflation higher.
Through a series of recent speeches, Fed officials have made it clear that their primary concern is unemployment. Though they have stated that rising inflation is a worry, the central bankers have pledged to continue to cut rates in an attempt to prevent the economy from entering a recession and losing even more jobs.
"The Fed's biggest concern right now is supporting the financial system by trying to stimulate growth," said Bullard. "The Fed is counting on the fundamentals - rising inflation should dissipate as the economy slows."
But Americans' concerns do not end with jobs and inflation.
According to the poll, 76% of Americans are concerned about the recent drop in the stock market, and 77% are worried about the drop in the amount off money homeowners get when they sell their houses.
The S&P 500 has fallen 11.5% so far in 2008. And the continuing housing crisis has sent new home sales plummeting over 15% since a year ago. The median price of a single-family home is at its lowest point since February 2005.
"The economy is lucky that consumer spending hasn't fallen off the cliff," said Bullard, who believes that sustained spending has prevented the U.S. economy from entering a recession. "The Fed is definitely concerned, because housing and the stock market affect net worth and impact consumer spending."