Personal Finance

Experts see higher stagflation risks. Here’s what it means for your money

Published

3 weeks ago

April 19, 2025

Business Finance News

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Weary consumers, already grappling with high prices, now face an added potential risk: stagflation.

Stagflation — an economic term used to describe a combination of rising inflation, slower economic growth and high unemployment — may be on the horizon, according to economists.

“The Trump White House tariff policy has certainly increased the risk of both higher inflation and lower growth,” said Brett House, professor of professional practice in economics at Columbia Business School.

The Trump administration’s tariff policies are fueling stagflation conditions, according to the latest CNBC Rapid Update, which averages forecasts from 14 economists.

“It’s a more pronounced risk than at any time over the past 40 years,” said Greg Daco, chief economist at EY Parthenon and vice president at the National Association for Business Economics.

Uncertainty is already showing up in consumer confidence, said Diane Swonk, chief economist at KPMG.

“We’re seeing that kind of whiff of stagflation, where people are less secure about their jobs and they’re more worried about inflation down the road,” Swonk said.

What would stagflation mean in today’s economy?

Unidentified people line up with cans to buy gas at a Mobil gas station in Suffolk County, New York, in July 1979. In 1977 oil prices went up to more than $20 a barrel in response to increased demand and OPEC’s policy of limiting supply, which caused long lines at gas stations, and for the first time in history gasoline prices exceeded $1 a gallon.

Jim Pozarik | Hulton Archive | Getty Images

Stagflation was a major issue for the U.S. economy in the 1970s, when unemployment rates and inflation both rose as the country grappled with the costly Vietnam War and the loss of manufacturing jobs.

The 1970s-era stagflation is often associated with major oil price increases, leading to shortages and long lines at gas stations. However, some economists have argued it was actually monetary fluctuations that prompted stagflation.

The conditions prompted then Federal Reserve Chairman Paul Volcker to implement a dramatic tightening of monetary policy in the late ’70s and ’80s known as the “Volcker shock.” While inflation did come down as the Fed pushed interest rates higher, the central bank’s moves also prompted a severe recession — often defined as two consecutive quarters of negative gross domestic product growth — and higher than 10% unemployment.

We are within months of 'flirting' with recession, says KPMG's Diane Swonk

Stagflation would not happen in the same way today, according to Dan Skelly, head of Morgan Stanley Wealth Management market research.

The U.S. is no longer at the whim of foreign oil, Skelly said. Moreover, unions, which prompted wage price spirals back then, are no longer as big a portion of the private work force today, he said.

The uncertainty around tariffs may affect corporate and consumer confidence, which would prompt spending and investment to slow, Skelly said. The likelihood of the growth slowdown part of stagflation is fairly high, he said.

However, Skelly said Morgan Stanley expects to see more effects in the stock market through earnings than in the economy.

Many firms are revising their economic forecasts, including the possibility of a recession, as a result of Trump administration policies, according to a new survey by Chief Executive.

Stagflation is not necessarily accompanied by a formal recession; rather, it can be slowing or stagnant growth, House said.

KPMG’s current forecast expects a shallow recession, with inflation peaking at the end of the third quarter.

“It’s not even what we saw during the pandemic,” Swonk said of the inflation spike. But it would be enough for employment to slow and to prompt a mild bout of stagflation, she said.

Stagflation, if it happens, would be the “worst of both worlds,” with higher unemployment and costs, Daco said.

“That represents a significant hardship for many families and businesses across the country,” he said.

How can you prepare for stagflation?

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Americans may be facing a challenging economic period, with slower income growth, reduced employment prospects, higher unemployment and higher prices making it more difficult to stretch household budgets, according to House.

To prepare for stagflation, consumers would need to take all the steps they would in a recession as well as the steps they would take when prices are rising, said Sarah Foster, economic analyst at Bankrate.

As tariffs are expected to drive prices up, consumers may be tempted to buy ahead, even big-ticket items such as cars, laptops, smartphones or even homes.

Before making any such purchases, it’s important to make sure it’s in your budget, Foster said.

“It is absolutely wise right now to buy something that you know could be impacted by tariffs that you’ve already been budgeting for,” Foster said.

Yet consumers should be careful when it comes to “panic buying,” she said, or spending money to save money.

Instead of overstretching their budgets with purchases, consumers should prioritize paying down high-interest credit card debt and building up an emergency fund. Focusing on high-interest debt first can save money in the long run, and having an emergency fund provides a financial safety net.

Experts generally recommend having at least six months’ expenses set aside. While it can be difficult to sock away extra money amid higher prices, the good news is higher interest rates are still providing inflation-beating returns on cash through online high-yield savings accounts that are FDIC-insured, Foster said.

For those who have been keeping cash on the sidelines rather than investing, now is the time to start allocating toward equities and riskier assets, considering the recent market drop, Skelly said.

“Don’t do it all in one day, but start winding down some of that cash, now that values are more fair than they were a month or two ago,” Skelly said.

Investors who have reaped big profits may want to rebalance to more neutral positions now, he said.

Can the economic forecast change?

Treasury Secretary Scott Bessent, rear left, and Commerce Secretary Howard Lutnick stand as President Donald Trump signs executive orders and proclamations in the Oval Office at the White House in Washington, April 9, 2025.

Nathan Howard | Reuters

There’s no guarantee stagflation will happen.

In 2022, one survey found 80% of economists said stagflation was a long-term risk.

But it was avoided at that time with a mix of strong economic growth, disinflation and a robust labor market encouraged by the Federal Reserve, Daco said.

Much of the risks popping up in today’s economic forecasts are the result of White House policies, economists say.

The Trump administration could reduce stagflation risks, Daco said, by reducing policy uncertainty, easing immigration restrictions that will reduce the labor supply, and not implementing tariffs on major trading partners.

House said the U.S. entered 2025 with a “well-performing economy,” which he said has been threatened by the Trump administration’s recent policy changes. It is up to the administration to unwind those policies and “prevent stagflation from occurring,” he said.

The White House did not respond to a request for comment from CNBC.

Personal Finance

Social Security COLA for 2026 projected to be lowest in recent years

Published

6 hours ago

May 13, 2025

Business Finance News

Customers shop for produce at an H-E-B grocery store on Feb. 12, 2025 in Austin, Texas.

Brandon Bell | Getty Images

The Social Security cost-of-living adjustment for 2026 is on pace to be the lowest annual benefit increase in five years, according to new estimates.

But that may change depending on the pace of inflation in the coming months.

The 2026 COLA may be 2.4% in 2026, according to new projections from both Mary Johnson, an independent Social Security and Medicare policy analyst, and The Senior Citizens League, a non-partisan senior group.

If that increase goes into effect next year, it would be lower than the 2.5% boost to benefits Social Security beneficiaries saw in 2025. It would also be the lowest cost-of-living adjustment since 2021, when a 1.3% increase went into effect.

The Social Security COLA provides an annual inflation adjustment to all of the program’s beneficiaries, including retirees, disabled individuals and family members.

The annual adjustment for the next year is calculated by comparing third quarter inflation data for the current year to the previous year. The year-over-year difference determines the annual increase. However, if there is no increase in the the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, from year to year, the COLA may be zero.

The CPI-W, used to calculate Social Security’s COLA, increased by 2.1% over the past 12 months, according to data released Tuesday by the Bureau of Labor Statistics.

Annual inflation rate hit 2.3% in April, less than expected

In the months ahead, two factors may affect retirees’ cost of living, experts say.

Tariffs may push inflation higher

Inflation, as measured by the broader Consumer Price Index, sank to its lowest 12-month rate at 2.3% in April since 2021.

Yet tariffs may push the inflation rate higher in the months ahead, if those taxes imposed on imported goods go into effect.

Tariffs would prompt higher consumer prices and inflation. If that happens in the months ahead, the Social Security cost-of-living adjustment estimate for 2026 may move higher.

“This year will be a closer year to watch because of the tariffs,” Johnson said of the 2026 COLA estimate, which is recalculated every month with new inflation data.

The official COLA for the following year is typically announced by the Social Security Administration in October.

Prescription drug costs

President Donald Trump on May 12 issued an executive order taking aim at high prescription drug costs in the U.S. The White House hopes to bring those prices in line with other countries.

The policy would apply to Medicare and Medicaid, in addition to the commercial market, according to the White House.

Changing drug prices would be unlikely to impact the COLA estimate, according to Johnson. But retirees would see an impact to the personal budgets if drug prices came down, she said.

Many details of the executive order still need to be fleshed out, noted Leigh Purvis, prescription drug policy principal at AARP Public Policy Institute. Yet the nonprofit organization, which represents Americans ages 50 and up, praised the Trump administration’s efforts to curb big drug companies’ ability to charge retirees high prices for necessary prescriptions.

“A lot of people are aware that prescription drug prices are too high, and I think a lot of people are aware that we’re paying a lot more than other countries,” Purvis said.

“So any efforts moving us in the direction of paying less and paying something that’s more comparable to the rest of the world, I think is something that people could probably get behind,” she said.

Personal Finance

Student loan collections resume, credit scores tumble: NY Fed

Published

8 hours ago

May 13, 2025

Business Finance News

Student loan default collection restarting

Between their credit card balances, mortgages, auto loans, home equity lines of credit and student debt, Americans owe a record $18.2 trillion, according to a new quarterly report on household debt from the Federal Reserve Bank of New York.

Still, for the most part, borrowers are managing that debt relatively well — with one exception.

“Transition rates into serious delinquency have leveled off for credit card and auto loans over the past year,” Daniel Mangrum, research economist at the New York Fed, said in a statement. “However, the first batch of past due student loans were reported in the first quarter of 2025, resulting in a large jump in seriously delinquent borrowers.”

The delinquency rate for student loan balances spiked after a nearly five-year pause due to the pandemic, the New York Fed found. Nearly 8% of total student debt was reported as 90 days past due in the first quarter of 2025, compared to less than 1% a year earlier.

Although the student loan delinquency rate is “likely to go up a little bit more,” it is “still comparable to what it was in 2020,” the New York Fed researchers said on a press call Tuesday.

However, in a blog post, the researchers noted that “the ramifications of student loan delinquency are severe.”

Currently, around 42 million Americans hold federal student loans and roughly 5.3 million borrowers are in default, according to the U.S. Department of Education. Another 4 million borrowers are in “late-stage delinquency,” or over 90 days past due on payments.

Among borrowers who are now required to make payments — not including those who are in deferment or forbearance or are currently enrolled in school — nearly one in four student loan borrowers are behind in their payments, the New York Fed found.

“For many, this had grave consequences for their credit standing,” the New York Fed researchers said.

NY Fed: 9 million student loan borrowers face significant drops in credit score

The Education Department restarted collection efforts on defaulted student loans on May 5, which includes the garnishment of wages, tax returns and Social Security payments.

Until last week, the Education Department had not collected on defaulted student loans since March 2020. After the Covid pandemic-era pause on federal student loan payments expired in September 2023, the Biden administration offered borrowers another year in which they would be shielded from the impacts of missed payments. That on-ramp officially ended on Sept. 30, 2024 and delinquencies began appearing on credit reports in the first quarter of 2025.

As collection activity restarts, credit scores tumble

Both VantageScore and FICO reported a drop in average scores starting in February as early- and late-stage credit delinquencies rose sharply, driven by the resumption of student loan reporting.

The Federal Reserve Bank of New York also cautioned in a March report that student loan borrowers who are late on their payments could see their credit scores sink by as much as 171 points as collection activity resumes.

A separate analysis by TransUnion found that consumers who faced default in recent months have seen their credit scores fall by 63 points, on average. For super prime borrowers — or those with credit scores above 780 — who were seriously delinquent, scores sank as much as 175 points. Credit scores typically range between 300 and 850.

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Personal Finance

FTC’s new rule on ticket prices won’t bring costs down, experts say

Published

9 hours ago

May 13, 2025

Business Finance News

Fans watch Taylor Swift perform onstage during “Taylor Swift | The Eras Tour” at La Defense on May 10, 2024 in Paris, France.

Kevin Mazur | TAS24 | Getty Images

The Federal Trade Commission’s new guidelines on price transparency — known as the junk fees rule —will change how ticket prices are presented, which is a rare victory for consumers, experts say.

According to the FTC, businesses selling live-event tickets or short-term lodging must prominently show the total cost upfront, including “all charges or fees the business knows about and can calculate,” before asking for payment. They must also “avoid vague phrases like ‘convenience fees,’ ‘service fees,’ or ‘processing fees'” and “conspicuously disclose the amount and purpose of those charges,” the FTC explained.

“More transparency is always a win for consumers,” said Andrew Mall, an associate professor of music at Northeastern University. However, “if there are any consumers who have been expecting fewer fees as a result, they will be disappointed,” he added.

Consumers have grown increasingly frustrated with ticket sellers in recent years, especially as a number of blockbuster tours tested the limits of what concert goers were willing to pay.

“Concert ticket pricing is a very elastic economic model,” Mall said, “there is no limit.”

Post-pandemic, ticket prices soared, also known as “funflation.”

The prevalence of tacking on “junk fees” as well as implementing “dynamic pricing,” which is when ticket-selling platforms charge more per ticket depending on demand at any given time, caused costs to escalate even more, often unexpectedly. Neither of these strategies are prohibited under the FTC’s new rule.

“This is not about capping fees or saying what fees companies can or cannot charge,” said Teresa Murray, director of the consumer watchdog office for U.S. PIRG, a nonprofit consumer advocacy research group.

“It’s about transparency and it’s about making things fair, not just for consumers but also for other businesses,” she added.

The rule is narrower than what the FTC proposed in 2023. That rule would have broadly banned hidden charges as part of former President Joe Biden’s wide-ranging crackdown on junk fees that drive up costs without providing visible benefits.

Ticket sellers can continue to charge whatever they want for concerts, sporting events, music, theater and other live performances, Murray said. “They just have to give the total price upfront.”

Consumers will see some immediate changes

Ticketmaster on Monday launched “All In Prices” in the U.S., which now shows the full price of tickets, including all fees before taxes and shipping charges.

“Ticketmaster has long advocated for all-in pricing to become the nationwide standard so fans can easily compare prices across all ticketing sites, and we commend the FTC for making that a reality,” Ticketmaster COO Michael Wichser said in a statement. “Paired with the recent executive order targeting abuse in the secondary market, it marks a meaningful step forward for our industry and we’ll continue pushing for additional reforms that protect both artists and fans.”

Secondary-market seller SeatGeek also announced in a press release Monday it will now display the price of tickets with fees included upfront on its platform, in line with the FTC’s new guidelines.

“Fans deserve pricing that’s clear from the start,” Jack Groetzinger, SeatGeek’s co-founder and CEO, said in the release. “This is an important step forward.”

There may also be a knock-on effect to come, Murray said.

“In the secondary market, where there is a lot of competition, maybe those companies will shave off a few of those fees so they appear to be the lowest cost,” she said. “We wouldn’t be surprised if some fees went away.”

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