New York Fed survey shows higher short-term inflation expectations in U.S.
U.S. consumers expect inflation to run hotter over the next year and three years, even as views on gasoline prices and household finances improve in June. The rise in short-term inflation expectations comes as Federal Reserve officials keep rates steady but continue to weigh the risk of further price pressures later this year.
Highlights
- New York Fed's June Survey of Consumer Expectations shows one-year inflation expectations rise to 3.7% from 3.5%, the highest since September 2023.
- Three-year inflation expectations increase to 3.3% in June from 3.1%, the highest since June 2022, while five-year expectations remain steady at 3%.
- Elevated PCE price index—up 4.1% in May versus 3.8% in April—reflects ongoing pressure from higher energy prices due to Middle East conflict disruptions.
June survey signals firmer inflation outlook
As reported by Reuters, citing the Federal Reserve Bank of New York, one-year inflation expectations rise to 3.7% in June from 3.5% in May, the highest reading since September 2023, according to its latest Survey of Consumer Expectations.Expected inflation three years ahead climbs to 3.3% from 3.1%, reaching its highest level since June 2022. Five-year inflation expectations, a measure closely watched by central bank officials, hold steady at 3%.
The increase in near-term inflation expectations comes as broader inflation readings remain under pressure from higher energy costs linked to the Middle East war. The personal consumption expenditures price index is up 4.1% in May from a year earlier, compared with a 3.8% annual gain in April.
The conflict disrupts the transit of key energy products and other goods, pushing up prices for gasoline and diesel and adding to inflation that is already running above the Fed's 2% target. Even so, the most intense phase of the conflict appears to be over, and retreating energy prices suggest some future easing in price pressures.
Our earlier coverage of the Federal Reserve’s inflation debate highlighted New York Fed President John Williams’ view that retreating oil prices and lower projected energy costs could ease headline inflation in the near term. The piece also noted that while policy was kept unchanged, officials remained data-dependent and still faced the question of whether persistent price pressures might require further tightening.
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