By Michael S. Derby

Americans' expectations for the inflation over the next few years hit its highest level last month since March 2014, amid surging expectations for housing related costs, the Federal Reserve Bank of New York said Monday.

In the bank's Survey of Consumer Expectations for March, those polled said they see inflation a year from now at 3.2% and at 3.1% three years from now. Both readings were up 0.1 percentage points from February.

Amid the jump in overall expected inflation, projected home price increases a year from now booked a 0.8% percentage point rise to a series high 4.8% gain. Expected rental costs and gasoline prices also hit the highest level of expected gains in the history of the New York Fed survey.

Amid the jump in expected price pressures, survey respondents also project higher incomes and spending. An expected rise in income was at its highest level since January 2020, before the coronavirus pandemic took hold, while anticipated spending levels were at their highest reading since December 2014.

The New York Fed report also said "perceptions about households' current financial situations compared to a year ago improved slightly in March with fewer respondents reporting being worse off than they were a year ago."

The bank's report arrives as the U.S. economy is widely expected to enjoy a year of very strong growth as the nation emerges from the pandemic. The Fed and broader government have acted with historic force to aid the recovery and that has driven concerns, especially among market participants, that a long period of very low inflation relative to the Fed's 2% target may be about to give way toward notably higher levels of price increases.

As part of the Fed's new monetary policy framework, officials now actively seek inflation pressures that will overshoot their 2% target to make up for the long periods they've fallen short of that goal. Fed officials also have said they expect to see a jump in inflation pressures over the next few months, but they don't foresee an enduring rise in inflation.

At the Fed's most recent monetary policy meeting last month, officials penciled in no rise in the central bank's short-term rate target through their 2023 forecasting horizon. In a television interview aired Sunday, Federal Reserve Chairman Jerome Powell said an increase in rates this year was "highly unlikely," and in an appearance last week, the central bank chief noted the Fed would act if it saw a problematic increase in inflation.

"If it turned out that inflation, and particularly inflation expectations, were to move up materially in a way that suggested that they were being de-anchored and that inflation might move persistently well above 2%, we would react, of course, that would be our job," Mr. Powell said on Thursday.

Write to Michael S. Derby at michael.derby@wsj.com

(END) Dow Jones Newswires

April 12, 2021 11:35 ET (15:35 GMT)