Citigroup CEO Jane Fraser says low-income consumers are being more cautious

Citi Group CEO Jane Fraser said Monday that consumer behavior is diverging as inflation for goods and services makes life harder for many Americans.

Fraser, who heads one of the largest U.S. credit card issuers, said she sees a “K-shaped consumer.” That means the wealthy continue to spend, while lower-income Americans have become more cautious about their consumption.

“A lot of the spending growth in recent quarters has been with the affluent customer,” Fraser told CNBC’s Sara Eisen in an interview.

“We’re seeing a much more cautious low-income consumer,” Fraser said. “They are feeling more pressure from the cost of living, which has been high for them and has been rising. So while there are employment opportunities for them, the debt burdens are higher than before.”

The stock market has revolved around a single question this year: When will the Federal Reserve start cutting rates after a series of eleven rate hikes? Strong employment numbers and persistent inflation in some categories have complicated the picture, pushing back expectations for when easing will begin. That means Americans will have to live longer with higher rates on credit card debt, car loans and mortgages.

“I think we, like everyone here, hope that sooner or later economic conditions will lead to interest rates falling,” Fraser said.

“It is difficult to achieve a soft landing,” the CEO added, using a term for when higher interest rates reduce inflation without causing an economic recession. “We are hopeful, but it is always difficult to get one.”