A package of ground beef is displayed at a Costco store on May 2, 2024 in Novato, California.
Justin Sullivan | Getty Images
Consumers in April raised their expectations for near- and long-term price increases as home prices and fuel and energy inflation rose, a survey released Monday by the New York Federal Reserve showed.
The central bank’s New York district reported in its monthly consumer expectations survey that both one- and five-year outlooks were rising as respondents expressed less confidence that the Fed would be able to achieve its 2% inflation target anytime soon.
On a one-year basis, it is expected to rise to 3.3%, up 0.3 percentage points from March and the highest since November 2023. However, on a three-year basis, the outlook drops to 2.8%, a decrease of 0.1 percentage points.
The results mirrored the University of Michigan’s confidence survey released on Friday, which showed the one-year outlook in May was 3.5%, also up 0.3 percentage points, while the five-year outlook edged up to 3.1%.
All data were well above the Fed’s 2% target, reflecting the stubborn nature of inflation this year following a sharp deflationary trend in 2023.
Inflationary pressures are expected to come from a variety of sources. However, the expected rise in home prices is particularly troublesome for policymakers who expect housing costs to fall this year.
Survey respondents said they expected median home prices to grow 3.3% next year, up 0.3 percentage points from levels that have remained stable for seven consecutive months. It was also the highest reading since July 2022 and was driven by people with a high school degree or less, a lower-income group that particularly worried Fed officials during a surge in inflation in early 2022.
With housing costs expected to rise, respondents expect rents to rise 9.1%, up 0.4 percentage points from the previous month.
Fed officials again held rates steady at their latest meeting and said they needed to see more convincing evidence that inflation returned to their 2% target before cutting rates.
Fed Vice Chairman Philip Jefferson said on Monday that policymakers “continue to look for more evidence that inflation will return to the 2% target, and until that evidence is found, I think it is appropriate to keep policy rates within a restrictive range.” ”.
Consumers expect medical costs to rise 8.7% next year, up 0.6 percentage points from the March survey. They expect food prices to rise 5.3% (up 0.2 percentage points from the previous month), gasoline prices to rise 4.8% (up 0.3 percentage points from the previous month); college education to rise 9%, a substantial increase of 2.5 percentage points.
Employment expectations in the survey were mixed, with the unemployment rate rising but the likelihood of losing one’s job falling. However, the outlook for mobility declined, with 50.9% expecting to find work soon after losing their current job, the lowest reading since April 2021.
The survey was conducted two days ahead of the closely watched Labor Department Consumer Price Index report, which is scheduled to be released on Wednesday. Economists surveyed by Dow Jones expect that the CPI for all items in April will increase by 3.4% year-on-year, a decrease of 0.1 percentage points from March. Core inflation, excluding food and energy, is expected to be 3.6% in the 12 months.
