The bank found in its March Survey of Consumer Expectations that the public sees inflation a year from now at 3%, unchanged from the prior month. The expected level of inflation three years from now rose to 2.9% from 2.7% in February, while five years from now inflation is seen at 2.6% from the prior month's prediction of 2.9%.
The survey found that while overall expectations were mixed for inflation over coming years, the public in March forecast bigger rises in food, gasoline, rent, college and medical costs a year from now compared to February. Meanwhile, the expected rise of home prices a year from now held steady at 3% for the sixth straight month.
The New York Fed report on what consumers foresee for the economy comes as Fed officials, traders and investors are trying to divine whether unexpectedly sturdy inflation gains at the start of the year mean that last year's swift retreat in inflation has stalled.
Anxiety that inflation may no longer be moving as quickly toward the Fed's 2% inflation target has driven investors to pare back estimates of when the Fed will be able to lower its short-term rate target, with futures markets now split on the prospect of a June easing. Strong hiring data released on Friday showing robust payroll expansion in March further complicated the case for the Fed cutting rates.
Fed officials have over recent days cautioned that they need to see more progress on inflation before they can sign off on an easing. Fed Governor Michelle Bowman, speaking on Friday, even warned the central bank might need to act further to cool price pressures, saying "while it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse."
Fed officials believe the expected path of inflation greatly influences the actual level of inflation and have been sanguine on the state of projected price increases, which have on balance come down amid the broader retreat in inflation.
The New York Fed report said that last month survey respondents' views on the labor market were mixed and while they on balance viewed their personal financial situations more positively, the largest number of respondents in four years were worried about missing a debt payment. Those fears were concentrated in lower-income households and among respondents aged 40 to 60.
(Reporting by Michael S. Derby; Editing by Andrea Ricci)
By Michael S. Derby
