Inflation outlook rises, fueled by expected rise in housing costs, New York Fed survey shows
People shop at a grocery store in Monterey Park, California, on April 12, 2022.
Frederic J. Brown | AFP | beautiful images
According to a New York Federal Reserve survey released on Monday, consumers in April raised their expectations for short- and long-term price increases, driven by higher home price inflation along with higher prices. with fuel and power.
The central bank’s New York District reported in its monthly Consumer Expectations Survey that the outlook increased for one- and five-year horizons as respondents expressed less confidence that the Fed would soon reach achieve the 2% inflation target.
On a one-year basis, expectations rose to 3.3%, up 0.3 percentage points from March and the highest since November 2023. For the five-year outlook, expectations rose to 2.8 %, an increase of 0.2 percentage points. However, over the three-year period, the outlook drops to 2.8%, a decrease of 0.1 percentage points.
The results reflect University of Michigan Sentiment Survey Friday’s release showed May’s one-year outlook at 3.5%, also up 0.3 percentage points, while the five-year outlook edged higher to 3.1%.
All figures are well above the Fed’s 2% target and reflect the stubborn nature of inflation this year after a significant deflationary trend in 2023.
Inflationary pressure is expected to come from a variety of sources. However, the expected rise in home prices will be especially troublesome for policymakers, who expect housing costs to fall this year.
Survey respondents said they expect median home prices to rise 3.3% over the next year, up 0.3 percentage points from a seven-month plateau. That was also the highest since July 2022 and was driven by people with a high school education or less, a lower-income group that has Fed officials especially worried as rising inflation begins in early 2022.
Along with expected higher housing costs, respondents expect rents to increase 9.1%, up 0.4 percentage points from last month.
Fed officials at their most recent meeting they again maintained their stance on interest rates and said they needed to see more convincing evidence that inflation was returning to the 2% target before cutting.
Policymakers “continue to look for additional evidence that inflation will return to our 2% target, and until that is achieved, I think keeping policy rates within restrictions are appropriate,” Fed Vice Chairman Philip Jefferson said Monday.
Consumers see medical care growing 8.7% next year, up 0.6 percentage points from the March survey. They predict food prices will rise 5.3% (up 0, 2 percentage points compared to a month ago), gasoline increased by 4.8% (up 0.3 percentage points); and higher education increased by 9%, up 2.5 percentage points.
Employment expectations in the survey were mixed, with the unemployment rate rising even though the probability of losing one’s job was seen falling. However, mobility prospects fell, with 50.9% expecting to find work quickly after losing their current job, the lowest since April 2021.
The survey comes two days ahead of the closely watched Labor Department’s report on the consumer price index, which will be released on Wednesday. Economists surveyed by Dow Jones expect the CPI of all items to rise 3.4% in April from a year earlier, down 0.1 percentage point from March. Core inflation, no including food and energy, is forecast to be 3.6% over 12 months.
