Markets
US Inflation Expectations Decline for Second Consecutive Month, NY Fed Survey Reveals
US consumers’ near-term inflation expectations have decreased for the second month in a row, according to a recent survey by the Federal Reserve Bank of New York. This trend reflects a more optimistic outlook on the future costs of housing and other essential goods.
- Near-term Inflation Expectations: Consumers expect prices to rise at an annual rate of 3% over the next year, down from 3.2% in May.
- Home Prices: Expectations for home price increases fell to 3% in June from 3.3% in May.
- Core Consumer Price Index: A report due Thursday is expected to show a 0.2% rise in June, marking the smallest back-to-back gains since August.
- Long-term Inflation Outlook: The median outlook for inflation in three years rose slightly to 2.9% in June from 2.8% in May, while the five-year outlook dropped to 2.8% from 3%.
Decline in Near-term Inflation Expectations
The survey revealed that consumers now expect prices to climb at an annual rate of 3% over the next year, a decrease from the 3.2% expectation in May. This shift brings short-term inflation expectations back to the level that was consistent from December until April, before it spiked to 3.3%.
Home Prices and Essential Goods
Consumers’ expectations for home price increases have also moderated, falling to 3% in June from 3.3% in May. This aligns with the 12-month trailing average. Additionally, consumers anticipate slower rises in the costs of gas, food, medical care, and rent over the next year.
Core Consumer Price Index
The survey’s findings are consistent with recent data showing a deceleration in inflation. A forthcoming report is expected to indicate that the core consumer price index, which excludes volatile food and energy costs, rose by 0.2% in June for the second consecutive month. This would represent the smallest back-to-back gains since August, aligning more closely with the Federal Reserve’s targets.
Long-term Inflation Outlook
While near-term expectations have declined, the median outlook for inflation three years from now has slightly increased to 2.9% in June from 2.8% in May. Conversely, the five-year inflation outlook has dropped to 2.8% from 3%.
These mixed signals suggest that while consumers are becoming more optimistic about the short-term economic environment, there remains some uncertainty about the longer-term trajectory of inflation.
The Federal Reserve Bank of New York’s survey indicates a positive shift in consumer sentiment regarding near-term inflation, with expectations for price increases moderating across various sectors. However, the slight rise in the three-year outlook and the drop in the five-year outlook highlight ongoing uncertainties in the economic landscape.