Consumers increased their expectations for price increases in both the short and longer term in April, fueled by higher inflation in housing prices and fuel and energy, according to a New York Federal Reserve survey released Monday.
The New York District of the Federal Reserve reported in its monthly survey of consumer expectations that the outlook improved over the one- and five-year horizons as respondents expressed little confidence that the Fed will meet its 2% inflation target any time soon.
On a one-year basis, the expectation rose to 3.3%, an increase of 0.3 percentage points compared to March and the highest level since November 2023. For the five-year outlook, the expectation rose to 2.8%, an increase of 0.2 percentage points. However, the three-year outlook fell to 2.8%, a decline of 0.1 percentage points.
The results echo the University of Michigan sentiment survey released Friday, which showed the one-year forecast for May at 3.5%, also up 0.3 percentage points, while the five-year forecast rose to 3.1%.
All readings are well above the Fed’s 2% target and reflect the persistence of inflation this year, after a significant disinflationary trend in 2023.
Inflationary pressures are expected to come from a variety of sources. But the expected rise in house prices is particularly worrisome for policymakers who expect housing costs to fall this year.
Survey respondents said they expected house prices to rise by an average of 3.3% next year, up 0.3 percentage points from levels that had remained stable for seven months. That was also the highest since July 2022 and was boosted by those with a high school education or less, a lower-income cohort that was of particular concern to Fed officials during a period of rising inflation that began in early 2022.
Along with expected higher house costs, respondents expect rents to rise by 9.1%, up 0.4 percentage points from the previous month.
At their most recent meeting, Fed officials again maintained their line on interest rates, saying they needed to see more convincing evidence that inflation was moving back toward the 2 percent target before cutting them.
Policymakers “continue to look for further evidence that inflation will return to our 2% target, and until then, I believe it is appropriate to keep the federal funds rate in restrictive territory,” Fed Vice Chairman Philip Jefferson said , on Monday.
Consumers expect medical care to rise 8.7% next year, up 0.6 percentage points from the March survey. They expect a 5.3% increase in food prices (up 0.2 percentage points from the previous month), a 4.8% increase in gasoline prices (up 0.3 percentage points) and a 9% increase in higher education, which represents an increase by 2.5 percentage points.
Employment expectations in the survey were mixed, with unemployment increasing but the perceived likelihood of losing a job decreasing. However, mobility prospects fell: 50.9% expect to find a job quickly after losing their current job, the lowest level since April 2021.
The survey comes two days ahead of the Labor Department’s closely watched consumer price index report, scheduled to be released on Wednesday. Economists surveyed by Dow Jones expect April’s headline CPI to show a 3.4% year-on-year increase, down 0.1 percentage points from March. Core inflation, excluding food and energy, is expected to be 3.6% over the next 12 months.
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2024-05-13 16:58:00
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