People shop at a grocery store in Brooklyn on July 11, 2024 in New York City.
Spencer Platt | Getty Images
Consumers grew more confident in July that inflation would not be a major problem in the coming years, according to a report from the New York Federal Reserve released Monday, putting the three-year outlook at a new low.
The latest views from the monthly Consumer Expectations Survey show respondents expect inflation to remain high next year but then gradually decline over the next few years.
In fact, the three-year portion of the survey found that consumers expect inflation to run at just 2.3%, down 0.6 percentage points from June and the lowest in the survey’s history, dating back to June 2013.
The results come with Investors worry about inflation and whether the Federal Reserve can interest rate cut as early as next month. Economists see expectations as key to inflation because consumers and businesses will adjust their behavior if they think prices and labor costs are likely to continue rising.
On Wednesday, the Labor Department will release its own monthly inflation gauge, the consumer price index, which is expected to have risen 0.2% in July and an annual rate of 3%, according to Dow Jones estimates. That’s still a full percentage point away from the Fed’s 2% target but only about a third of where it was two years ago.
The market has fully priced in the possibility of at least one quarter percent Interest rates were cut in September and there is a good chance the Fed will cut rates another percentage point by the end of the year.
While the medium-term outlook improved, one-year and five-year inflation expectations remained unchanged at 3% and 2.8%, respectively.
There was some other good news on inflation in the survey, however.
Respondents expect gasoline prices to rise 3.5 percent next year, down 0.8 percentage points from June, and food prices to rise 4.7 percent, down 0.1 percentage points from the previous month.
Additionally, household spending is expected to rise 4.9%, 0.2 percentage points lower than June and the lowest since April 2021, just as the current inflation spike began.
In contrast, expectations for health care, higher education and rent increased. The outlook for college costs jumped to a 7.2% increase, up 1.9 percentage points, while the rent component — a particular irritant for Fed officials looking to lower housing costs — is expected to rise 7.1%, up 0.6 percentage points from June.
Job prospects are brighter, though high unemployment rate. The perceived probability of losing a job in the next year fell to 14.3%, down half a percentage point, while voluntary turnover expectations, a measure of workers’ confidence in labor market opportunities, rose to 20.7%, up 0.2 percentage points and the highest since February 2023.
