By Michael S. Derby

American's expectations of future price increases jumped higher again in April, according to new data from the Federal Reserve Bank of New York.

Households' expectations of inflation levels one year from now grew to 3.4% in April from 3.2% in March, for the highest reading since September 2013, the bank said in its latest Survey of Consumer Expectations. The survey found expected inflation levels three years from now unchanged at 3.1%.

The jump in overall expected inflation came as households projected notable price increases for homes, rent and other categories. Expected home price gains hit a record for the survey at a 5.5% rise, up from March's expected 4.8% increase. Rent costs were seen up by 9.5%, which the bank flagged as a record high and the fifth straight month of expected home price gains.

Expectations of future higher prices came as households dialed back their projections of future income levels. Survey respondents said they see household income up by 2.4% a year from now, down from the 2.8% rise they predicted the prior month. Expected future spending plans also ticked back, the New York Fed said.

"Perceptions about households' current financial situations compared to a year ago improved in April, with fewer respondents reporting to be worse off now," the bank said in the report, adding, "expectations about households' financial situations in the year ahead were largely stable."

The New York Fed report arrives at a time of broad-based anxiety about the outlook for inflation in the U.S. economy as the coronavirus pandemic wanes. Federal Reserve officials have said repeatedly they expect to see inflation rise as the economy fires back up and that price increases may be volatile, unpredictable, and likely to exceed for a time their 2% target, before cooling back down.

"An episode of one-time price increases as the economy reopens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation into the future, inflation at levels that are not consistent with our goal of 2% inflation over time," Federal Reserve chairman Jerome Powell said after the Fed's late April rate setting Federal Open Market Committee meeting.

Mr. Powell said if inflation did appear to be breaking out toward persistently higher levels, "we would use our tools to bring inflation expectations down to mandated, consistent levels."

Surging inflation expectations are a challenge to the Fed's outlook, however. Central bankers and many private sector economists believe that where the public expects inflation to go over time exerts a powerful influence on where price pressures are now.

That means higher inflation expectations auger a jump in actual inflation. But Fed officials have been dismissive of the rise in expectations seen of late, and some have said the increase in inflation expectations represents less of a surge and more of a return to readings seen in years past.

New York Fed leader John Williams, speaking to reporters last week, also cautioned that surveys of expected inflation "tend to run much higher" than actual inflation. He also said in a separate interview last week that some history is worth keeping in mind when looking at the current inflation environment.

"We saw in 2011, really early in the last recovery, a pickup in overall inflation which obviously was driven in part by energy prices, but even core inflation moved up back then," Mr. Williams said. But an inflation surge never materialized, he said, and that jump a decade ago "wasn't a sign of the economy overheating but more of a sign of some specific factor of the rebound in commodity prices and some other prices."

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

(END) Dow Jones Newswires

May 10, 2021 11:14 ET (15:14 GMT)