More consumers believe inflation will ease in the near and long terms, with inflation expectations declining across all horizons tracked in August, according to the Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations released today. Expectations about year-ahead price increases for gas dropped, with households now expecting gas prices to be roughly unchanged a year from now. Home price growth expectations fell sharply and expectations of future credit access deteriorated. Consumers also were more optimistic about their future household income and financial situations.
Median one- and three-year-ahead inflation expectations continued their steep declines in August, to 5.7% from 6.2% in July and to 2.8% from 3.2%, respectively. Median five-year-ahead inflation expectations also declined to 2% from 2.3%. Median home price expectations declined by 1.4 percentage points to 2.1%—the lowest reading since July 2020 and falling below pre-pandemic levels.
Expectations about year-ahead price changes fell 1.4 percentage points to 0.1% for gas, 0.8 percentage point to 5.8% for food and 0.3 percentage point to 9.6% for rent. The median expected growth in household income increased by 0.1 percentage point to 3.5%, a new high. Median household spending growth expectations increased by 1 percentage point to 7.8%.