New York Fed poll finds general expectations of higher inflation

Written by Michael S. Derby

(Reuters) – Americans braced last month for generally higher inflation pressures over the next few years and accelerating increases in home prices, according to a report released Monday by the Federal Reserve Bank of New York.

The bank said in its latest consumer expectations survey that participants expect inflation one year from now to reach 3.3% from 3% in March, while inflation is expected to decline three years from now to an expected rise of 2.8% from 2.9% per month. the previous. The inflation rate for the next five years is expected to reach 2.8%, compared to 2.6% in March.

The Fed's inflation target is 2%, and the personal consumption expenditures price index, the central bank's preferred measure of inflation, was 2.7% year-on-year in March, up from 2.5% in February.

In the survey, respondents also reported that they expect higher price pressures a year from now in all categories measured, including rent, food, gasoline and medical costs. The expected rise in home prices a year from now rose to its highest level since July 2022, an increase of 3.3% from the 3% that prevailed in the previous seven months.

While the report found that respondents expected future earnings and lower income gains, it also found expectations that future spending would rise. It also found that families became more concerned about their personal finances even as they were more optimistic about their access to credit. The survey also found mixed opinions about the job market, with the lowest level of respondents saying they could get a job if they had lost one since April 2021.

The New York Fed's report comes as the Fed struggles to make sense of unexpectedly sticky price pressures during the start of the year. This landscape complicates officials' expectations that they will be able to cut interest rates this year.

The rise in the expected near- and long-term path of prices is further challenging the forecast, as Fed officials and many private sector forecasters believe that where the public expects inflation to head in the future has a strong influence on its standing. today.

In a separate report, the Cleveland Fed said inflation expectations among business leaders rose during the second quarter, with executives saying they expect the CPI to rise 3.8% over the next year, from the 3.4% gain they expected in the first quarter.

(Reporting by Michael S. Derby; Editing by Andrea Ritchie)