The Federal Reserve Bank of New York published its September consumer survey. American households now expect prices to rise by 3.9% over the next 12 months. A month earlier, the figure was 3.6%, and the market expected the same. This is the highest level of short-term inflation expectations since May 2023.
What the numbers showed
The report was published on October 7 at 18:00 Moscow time. One-year inflation expectations rose to 3.9%. Three-year expectations climbed to 3.3% versus 3.2% previously. The five-year figure remained unchanged at 3.0%. For comparison, the Fed's official inflation target is 2%. Expected growth in household spending also rose to its highest level since May 2023.
What this survey is
The New York Fed conducts its consumer expectations survey monthly. It includes about 1,200 heads of households. Each participant can remain in the sample for up to 12 months, which makes it possible to track how the views of the same consumers change over time. This is not actual inflation, but the population's expectations regarding future price growth.
Why expectations matter for the Fed
Inflation expectations can influence the real behavior of consumers and businesses. If people expect rapid price growth, they may make purchases earlier and demand higher wages. Companies, in turn, may find it easier to raise prices. That is why it is important for the Fed that long-term expectations remain relatively stable and do not begin to accelerate along with short-term ones.
What looks calmer in the report
The main positive detail is five-year expectations. They remained at 3.0% and did not rise along with the one- and three-year figures. This means that consumers are not yet transferring the sharp rise in near-term expectations to the distant horizon. For the Fed, it is precisely the stability of long-term expectations that is especially important.
How the market reacted
After publication, the DXY dollar index again approached its 18-month highs. Gold fell below $4,100, after which it partially recovered. US government bond yields also moved higher. The rise in inflation expectations complicates the arguments in favor of rapid monetary policy easing.
What's next
One publication is not enough to speak of a sustained reversal in inflation expectations. The market will monitor the next monthly surveys. If the one-year figure continues to rise and the movement then spreads to longer horizons as well, this will become a more serious signal for the Fed. For now, the main contrast in the report looks like this: 3.9% for one year ahead versus a stable 3.0% for five years.
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