Could Long-Term Inflation Surpass Previous Projections?

New York Federal Reserve Survey of Consumer Expectations for May provided a mixed view on inflation, showing an improvement in short-term outlook but a decline in long-term expectations. Despite this, there was an increase in confidence regarding household finances among consumers. In terms of inflation, consumers anticipate prices to increase by 3.2% over the next year, a slight improvement from April. However, their projections for inflation three years out remained steady at 2.8%, while expectations for five years showed a jump to 3%, indicating concerns about long-term price pressures.

Federal Reserve officials closely monitor consumer sentiment on inflation, as expectations can impact the rate of inflation. Chicago Federal President Austan Goolsbee highlighted the importance of five-year consumer inflation expectations in gauging inflation’s trajectory. Consumers also foresee a 3.3% increase in home prices over the year, with expectations for gas, food, and rent remaining unchanged from the prior month. Additionally, the survey indicated that consumers have more positive views on their household finances, with a large percentage expecting them to remain the same or improve over the next year.

Overall, the survey showed a mix of consumer sentiment regarding inflation and household finances, with short-term improvements but lingering concerns about long-term price pressures. While there were improvements in short-term outlooks on inflation and confidence regarding household finances among consumers, there were still concerns about long-term price pressures as seen by their projections for five years out.

By Sophia Gonzalez

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