Consumers are expecting rate hikes: NY Fed survey
Add Axios as your preferred source to
see more of our stories on Google.
With energy prices falling back toward pre-Iran war levels, you might expect Americans' inflation outlook to improve. You would be wrong, at least according to one major survey.
Driving the news: The New York Federal Reserve's Survey of Consumer Expectations showed a 0.2 percentage point rise in respondents' expected inflation for both the next year and the next three years.
- That pushes the one-year inflation expectation to 3.7% in June, the highest since 2023, and the three-year expected inflation to 3.3%, the highest since 2022.
- The survey also showed an improving outlook for the labor market, with respondents' expected earnings growth ticking up and their perceived odds of losing their job in the next 12 months falling.
State of play: With inflation running above its 2% target for the last five-plus years, the Fed is hyper-attuned to the possibility of inflation expectations becoming unanchored and a self-reinforcing pattern of rising prices becoming entrenched.
- The New York Fed results will do nothing to assuage that fear.
Yes, but: Bond market measures of the inflation outlook have improved in recent weeks.
- And the University of Michigan consumer sentiment survey showed an opposite move, with both year-ahead and longer-term inflation expectations falling in June.
Between the lines: Let's put it this way: Nobody would set monetary policy based on a single survey of consumers.
- But if they did set policy based on one survey, these results would amount to a big flashing sign in favor of rate hikes.
