- A "soft landing" scenario is unlikely for the US economy, Citi CEO Jane Fraser said.
- The bank chief said that wealthier Americans are spending while lower-income income consumers are cutting back.
- "We're seeing a much more cautious low-income consumer," Fraser said.
It's going to be tough for the US to stick an economic soft landing, and rampant inflation is hitting lower-income Americans hard, Citi CEO Jane Fraser said.
"It's hard to get a soft landing," Fraser told CNBC on Monday. "We're hopeful, but it is always hard to get one. So far the Fed is trying to navigate a quite complicated system."
At the latest Federal Reserve policy meeting, officials held the interest rates steady and ruled out a rate hike in response to sticky inflation. Markets have seen renewed hope of a soft landing since the April jobs report showed hiring and wage growth slowed, though not to recessionary levels. Yet, Fraser cautioned against declaring a soft landing was a done deal.
"We have to see where wage inflation goes. We have to see what happens to services inflation. And I think we need some more data points," she said. "I think, like everyone here, we're hoping to see the economic conditions that will allow rates to come down sooner rather than later."
The Citi executive also said she's seeing a "K-shaped consumer" pattern, with affluent consumers ramping up their spending while low-income households are struggling with the higher cost of living.
"We're seeing a much more cautious low-income consumer," Fraser said. "They're feeling more of the pressure of the cost of living, which has been high and increased for them. So while there is employment for them, debt servicing levels are higher than they were before."
Wall Street has been feeling fairly upbeat but a number of commentators are still voicing caution over trouble ahead. Gary Shilling and BCA strategist Roukaya Ibrahim this week forecast a recession by late this year or early 2025, potentially causing a 30% plunge in the stock market.