NY Fed Survey Shows US Consumers' 1-year Inflation Expectations Ease In May

(RTTNews) - A survey by the New York Fed showed on Monday that Americans' short-term inflation expectations eased slightly, while their view on price pressures in the longer term increased, and their expectations for the stock market hit a three-year high.

The Federal Reserve Bank of New York's May Survey of Consumer Expectations showed that one-year-ahead inflation expectations fell to 3.2 percent from 3.3 percent in April.

Expectations for inflation in three years was unchanged at 2.8 percent, while the projection for the five-year horizon rose to 3.0 percent from 2.8 percent. Households' expectations for the financial situation in 12 months were the strongest since June 2021, with 78.1 percent of survey respondents expecting to be financially the same or better off in a year's time.

The mean perceived probability that U.S. stock prices will be higher in the year ahead increased to 40.5 percent, the highest reading since May 2021, the survey showed.

The median expected increase in home prices in 12 months was steady at 3.3 percent in May. Food price growth expectation for the same time period was also unchanged at 5.3 percent and that for gas prices was steady at 4.8 percent.

Th expected growth in healthcare costs in one year rose to 9.1 percent from 8.7 percent, while that for college education eased to 8.4 percent from 9.0 percent. The expected increase in rents was unchanged at 9.1 percent.

The median one-year-ahead expected earnings growth was unchanged at 2.7 percent, while the mean probability that the U.S. unemployment rate will be higher one year from now increased to 38.6 percent from 37.2 percent. The Federal Reserve is set to announce its latest interest rate decision on Wednesday. The FOMC, led by Chair Jerome Powell, is widely expected to leave the benchmark interest rate at 5.50 percent.

The stronger than expected growth in payroll employment and the increase in average earnings revealed by last Friday's jobs report damped expectations for a September rate cut.

The strong labor market and wage growth are likely to make policymakers more cautious regarding policy easing. Economists continue to expect at least one interest rate cut this year.