People shop at a grocery store in Brooklyn, New York City on July 11, 2024.
Spencer Pratt | Getty Images
A report from the Federal Reserve Bank of New York on Monday showed the three-year outlook hit a new low, with consumer confidence growing in July and believing inflation will be less of a problem in the coming years.
The latest view from the monthly survey of consumer expectations shows that respondents think inflation will remain high next year but will fall back in subsequent years.
In fact, the three-year portion of the survey shows consumers expect inflation to be 2.3%, down 0.6 percentage points from June and the lowest level since the survey began in June 2013.
The result is here Investors nervous about inflation and whether the Fed can lower interest rates As soon as next month. Economists view expectations as key to inflation because consumers and business owners will adjust their behavior if they think prices and labor costs are likely to continue to rise.
On Wednesday, the Labor Department will release its own monthly inflation data, the Consumer Price Index, which Dow Jones estimates is expected to rise 0.2% in July, or a 3% annual rate. That’s a full percentage point short of the Fed’s 2% target, but about a third of what it was two years ago.
The market has fully priced in at least quarter of a percent With a rate cut in September, the Fed is likely to cut interest rates by a full percentage point before the end of the year.
While the medium-term outlook has improved, one-year and five-year inflation expectations remain unchanged at 3% and 2.8% respectively.
However, there is some other good news from the investigation.
Respondents expect natural gas prices to rise 3.5% next year, down 0.8 percentage points from June; food prices will rise 4.7%, down 0.1 percentage points from last month.
Additionally, household spending is expected to increase 4.9%, down 0.2 percentage points from June and the lowest reading since April 2021, just as the current inflation surge began.
Instead, expectations for health care, college education and rent costs rose. The outlook for college costs jumped to 7.2%, up 1.9 percentage points, while the rent component – which is particularly vexing to Fed officials who have been looking for lower housing costs – is expected to rise 7.1%, or 0.6 percentage points. One percentage point.
Despite improved employment expectations unemployment rate rises. The perceived probability of unemployment next year fell to 14.3%, a decrease of 0.5 percentage points, while expectations of voluntary separation, which represents workers’ confidence in labor market opportunities, climbed to 20.7%, a decrease of 0.2 percentage points. by one percentage point.
