According to the New York Fed’s August Survey of Consumer Expectations, respondents predict annual inflation to be 5.7% a year from now.
Along those lines, people now anticipate that gas prices will be little changed a year from now, but food prices would rise 5.8%.
Lower gas prices are increasing optimism that inflation is on the wane, according to a New York Federal Reserve study released on Monday.
According to the central bank’s August Survey of Consumer Expectations, respondents predict annual inflation to reach 5.7% a year from now. This represents a drop from 6.2% in July and the lowest level since October 2021.
In August, three-year inflation forecasts fell to 2.8% from 3.2% the previous month. This was the lowest level for that metric since November 2020.
The downgrade came as gasoline prices fell from well than $5 per gallon earlier this summer, a nominal record high. According to AAA, the current national average is roughly $3.71 per gallon, which is still much more than the price a year ago but a 26-cent decrease from the same point in August.
According to the Fed study, Americans now expect gas costs to be little changed a year from now. Food prices are predicted to rise further, but the 5.8% increase forecast for a year from now is 0.8 percentage point lower than it was in July.
Rents are expected to rise 9.6%, a 0.3 percentage point decrease from the July survey.
These figures come as the Fed uses a series of aggressive interest rate hikes to combat inflation, which is still around a more than 40-year high. When it meets again next week, the central bank is largely expected to approve a third consecutive 0.75 percentage point increase.
Rising cost of living
While consumers expect inflationary pressures to ease slightly, they believe the cost of living will rise.
In August, the median forecast for household expenditure over the following year increased by one percentage point to 7.8%, driven primarily by those with a high school diploma or less and a group largely constituted of lower earners.
Furthermore, respondents reported that credit is becoming more difficult to obtain. According to the New York Fed, those who say it’s harder to get credit currently have reached a series high, with 57.8% saying it’s either harder or extremely harder.
Also, those expected to miss a minimum debt payment in the next three months increased 12.2%, a 1.4 percentage point increase and the biggest reading since May 2020.
The Bureau of Labor Statistics will announce the August consumer price index report on Tuesday. Dow Jones economists polled estimate CPI to be up 8% from a year ago, but down 0.1% from July. Excluding food and energy, core CPI is expected to grow 6% year on year and 0.3% month on month.
