Americans Express Mixed Views on Inflation Outlook
A New Survey by the Federal Reserve Bank of New York Highlights Consumer Expectations
A recent survey conducted by the Federal Reserve Bank of New York reveals Americans’ varied perspectives on inflation and their expectations for the future. The survey indicates that respondents have downgraded their views on their personal financial situations and anticipate a significant decrease in the rise of college costs.
According to the survey, Americans predict that inflation a year from now will reach 3.7%, slightly higher than the 3.6% gain anticipated in August. Additionally, they expect three-year ahead inflation to stand at 3% as of September, compared to the previous month’s projection of 2.8%. However, despite the slightly deteriorated outlook for expected inflation in the near term, respondents project that inflation five years from now will stabilize at 2.8%, down from 3% in the August survey.
The survey also reveals that expectations for key price changes, such as gas and rent, remain relatively unchanged. However, respondents anticipate higher food costs in the future. Notably, the survey highlights a significant decrease in expected college price increases a year from now, dropping to 5.8% in September from the projected 8.2% rise in August. It is worth mentioning that this survey has been conducted since 2013.
The New York Fed survey coincides with a moderation in the overall pace of inflation, which has provided the central bank with the opportunity to ease up on aggressive rate rises aimed at bringing inflation back to the Fed’s 2% target. In August, the personal consumption expenditures prices index, the Fed’s preferred price pressure barometer, rose by 3.5% compared to the same month the previous year. Similarly, prices excluding food and energy witnessed a 3.9% gain over the same period. Fed officials welcome the relative stability of inflation expectations, as they believe it helps guide actual price pressures back to their target.
The survey also highlights growing concern among respondents regarding their personal financial situations, with increasing anxiety about access to credit. In addition, the possibility of missing a debt payment in the next three months has risen in September. While the report does not directly comment on this situation, it is possible that the restart of student loan repayments is contributing to some consumers’ unease. According to Oxford Economics, a pullback in consumer credit levels in August may be attributed to individuals proactively adhering to the repayment schedule.
The New York Fed report also indicates mixed labor market expectations, with unemployment expectations deteriorating and perceived job loss risk improving. Respondents reported projecting slight income and earnings gains. Expected spending levels remained steady in September at 5.3%, a figure significantly higher than pre-pandemic levels.
