Two polls assign Fed fault for downturn, inflation

In two independently conducted surveys, community bank leaders and consumers believe the country is headed into a recession, and they put most blame on the Federal Reserve.

Neary all community bank executives who participated in a nationwide poll, conducted by private banking company IntraFi Network LLC, indicate they believe that a recession is just around the corner, and more than half blame the Fed, which has raised interest rates by 2.25 percentage points this year.

The nationwide survey conducted via email in June, before the Fed's latest 0.75% interest rate hike found that 96% of responding community bankers think a recession will start this year or next, and 51% assign blame to what they view as an overcorrection by the Fed.

"Bankers have become less confident in the Fed's ability to curb inflation while guiding the economy to a soft landing," says Mark Jacobsen, CEO and co-founder of IntraFi, in a press release issued by the American Bankers Association.

However, 25% of respondents cite ongoing supply-chain issues, 5% fault the war in Ukraine, and 2% say lingering pandemic-related issues likely will be the largest contributors to a recession.

The separate consumer poll, conducted online in early July by personal finance site Wallet Hub, found that 60% of respondents are dissatisfied with the Federal Reserve's performance as inflation takes a toll on their finances, with 80% stating they believe the country is heading toward a recession.

In the survey of about 250 American consumers, 90% of respondents said they were concerned about inflation. Sixty-one percent blame U.S. politicians most for inflation, with 26% instead putting the most blame on Russian President Vladimir Putin, and 13% on the Fed.

At the same time, 51% don't believe the Fed raising interest rates will help with inflation. However, 56% say Fed rate hikes make them worry about layoffs and job security.

Sixty-three percent of respondents say the Fed's rate hikes have affected their wallets, and 35% say they are "upset" about rising interest rates.

Twenty-five percent are "unprepared" for the rate hikes, hut an equal percentage are "indifferent" about the Fed's actions, and 15% are "happy" the Fed raised rates.

Delaney Simchuk, analyst for WalletHub, says dissatisfaction with the Fed shouldn't be surprising, especially when considering that multiple groups are unhappy for different reasons.

"People who are watching the cost of their debt increase aren't pleased for obvious reasons, and those worried about inflation are not seeing anything change either," Simchuk says.

IntraFi's Jacobsen adds, "To a degree greater than reflected in the equity markets today, most banks do not believe the Fed can constrain inflation without triggering a recession."