NY Fed poll finds mostly stable inflation views, more financial worries

People walk by the Federal Reserve Bank of New York in the financial district of New York City, U.S., June 14, 2023. REUTERS/Shannon Stapleton/File photo

Americans’ overall views on inflation were little changed in August, even as they predicted rising price increases for things like rent, homes and food, while downgrading their views of their personal financial situations, the New York Fed reported Monday.

The bank said in its Consumer Sentiment Survey for August that respondents see inflation a year from now at 3.6 percent, up from July’s 3.5 percent, while they project inflation three years from now to hit 2.8 percent versus 2.9 percent in July. Five years from now respondents see inflation at 3 percent from July’s 2.9. percent.

READ: US consumer sentiment near two-year high in July

The relative stability of inflation expectations last month came as the survey found respondents predicted accelerating price increases for a range of key categories. In August, the survey found expected price gains for gasoline, food, rent, medical costs and college. Respondents also predicted that house prices would rise 3.1 percent, the highest reading since July 2022.

At the same time, survey respondents were more downbeat about access to credit and their current and future financial positions. They predicted future household income would rise by 2.9 percent in August, the weakest reading since July 2021, from July’s 3.2 percent.

A record number of households reported that credit was harder to get and a rising number of respondents predicted tougher credit access in the months ahead. At the same time, those surveyed by the bank were less upbeat about their current and future financial positions, while growing less upbeat about the job market.

READ: US banks report tighter credit, weaker loan demand -Fed survey

The New York Fed survey arrives as the Fed moves toward its next rate-setting Federal Open Market Committee meeting, scheduled for September 19-20. After its quarter percentage point rate increase at the end of July the Fed is expected to hold its overnight target rate range steady at between 5.25 percent and 5.5 percent.

Over recent weeks Fed officials have signaled a new phase for monetary policy due to mounting evidence that the high inflation that caused them to raise rates aggressively is finally moving back to the 2 percent target. That said, officials have kept alive the prospect they may have to raise rates again.

READ: US interest rates in ‘good place,’ for now: Fed officials

Central bank officials have been cheered by the performance of expected inflation because they believe that where the public projects price pressures to go has a strong influence on where they are right now. To that end, stable inflation expectations buoy their view inflation is returning to target.

Inflation expectations “have been incredibly well behaved, “ New York Fed President John Williams said last Thursday. More broadly, “things are moving in the right direction and we’ve got policy in a good place, but we’re going to need to continue to be data dependent, watch developments and assess what we need to do,” the official said.