Inflation Outlook Hits New High in New York Fed Consumer Survey
(Bloomberg) -- Inflation expectations among U.S. consumers rose to a new high for the coming year after months of soaring prices, according to the latest Federal Reserve Bank of New York survey.
Household expectations for inflation in the next 12 months climbed to 5.7% in October from 5.3% the previous month, according to the monthly Survey of Consumer Expectations published on Monday. Median expected inflation over the next three years held steady at 4.2%. Both figures are the highest since the survey began in 2013.
The numbers highlight one of the risks that’s persuaded Fed officials to shift toward tighter monetary policy.
The U.S. central bank has chalked up this year’s elevated inflation rates to supply-chain bottlenecks and other transitory pressures tied to the reopening of the economy after pandemic lockdowns. But as those drivers of higher prices proved to be bigger and longer-lasting than anticipated, there’s concern that households might come to expect more of the same -- and that shift could entrench inflation at above the 2% target.
Last week, the Fed announced it will start winding down its bond purchases later this month, though Chair Jerome Powell said the central bank can be patient on raising interest rates.
The central bank’s preferred inflation gauge was at 4.4% in September, the highest since 1991. On Wednesday the Labor Department will publish October’s consumer-price index. It’s forecast to show an annual rate of 5.9%.
The New York Fed survey showed that Americans foresee faster price increases over the coming year for items like rent and food, which take up a big chunk of household spending and can’t easily be substituted. Expectations for gains in food and gas prices were both above 9%, and for rents the figure rose to 10.1%, the highest on record.
Americans were also slightly less optimistic about their households’ financial situations in the year ahead. The average perceived probability of missing a minimum debt payment over the next three months increased by 1.3 percentage points to 11.2%, the highest reading since May 2020.
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