US consumers expect slightly higher inflation over the next few years and their views on current and future credit conditions deteriorated in September, according to a Federal Reserve Bank of New York survey.
(Bloomberg) — US consumers expect slightly higher inflation over the next few years and their views on current and future credit conditions deteriorated in September, according to a Federal Reserve Bank of New York survey.
The median inflation expectation three years out rose to 3% from 2.8% in August, the highest reading in almost a year, according to data published Tuesday. The outlook for price growth a year from now rose to a three-month high of 3.7%.
While price expectations fell in the five-year horizon, uncertainty about future inflation rose slightly across all time frames.
Fed officials have been on an aggressive interest-rate hiking campaign to tame the hottest inflation in a generation. Though it’s unclear whether they’ll tighten further at their Oct. 31-Nov. 1 meeting, policymakers have repeatedly expressed they will likely keep borrowing costs elevated well into next year.
Though inflation has largely come down from its June 2022 peak, it’s still running above the Fed’s 2% target. That’s in part because consumers continue to find in a resilient labor market the power to keep spending.
The International Monetary Fund boosted its global inflation projections earlier Tuesday while calling on central bankers to keep monetary policy tight until there’s a durable easing in price pressures. The Fed’s own economists don’t see price growth coming back to target anytime soon.
The average perceived probability of missing a minimum debt payment over the next three months rose to 12.5%, the highest since May 2020. Consumers’ perception of current and future credit availability deteriorated slightly.
While robust wage growth and lingering savings are still supporting consumer spending, some Americans are turning to credit cards to make ends meet and feeling the pinch from higher rates. The resumption of student-loan payments this month could also further strain budgets.
Respondents expressed mixed views on the labor market. While they said it was more likely that US unemployment would be higher next year, consumers in the NY Fed survey said it was less likely they’d lose their job over the next year and more likely to find a new one if they did.
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