New York Fed: Future Price Increase Expectations Jump Higher Again in April
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
"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
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
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 firstname.lastname@example.org
(END) Dow Jones Newswires
May 10, 2021 11:14 ET (15:14 GMT)
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