As per the most recent results from the Federal Reserve Bank of New York’s September 2024 Survey of Consumer Expectations, Americans hold a steady view of the inflation landscape over the next year but express growing concerns about inflationary pressures in the longer term.
The survey, which tracks consumer expectations about overall price increases, showed that median inflation expectations for the next 12 months remained stable at 3.0%. However, there is a significant shift in sentiment when looking further ahead. At the three-year horizon, inflation expectations edged up from 2.5% in the previous report to 2.7%. This trend continues even further out, with five-year inflation expectations rising from 2.8% to 2.9%.
An intriguing aspect of the report is the variation in inflation expectations based on educational attainment. Respondents with a high school education or less are particularly wary of inflation, anticipating higher rates than their more-educated counterparts. This group’s expectations for inflation are markedly more pronounced at the three- and five-year markers, suggesting a more deep-seated anxiety about the economic future.
This disparity could be attributed to a few factors. First, lower-income and less-educated individuals often spend a larger proportion of their income on essentials like food, housing, and transportation—expenses that are highly sensitive to inflation. As prices increase, these consumers may feel the impact more acutely, contributing to their heightened inflation expectations.
Furthermore, the issue of housing affordability looms large. With property prices and rents continuing to climb in many parts of the country, those on the lower rung of the socioeconomic ladder might be foreseeing tougher times ahead in terms of finding affordable housing. This concern is likely exacerbated by the sluggish wage growth that disproportionately affects lower-income workers.
These findings come at a time of considerable economic uncertainty. While the Federal Reserve has been actively attempting to stabilize prices through interest rate adjustments, the mixed signals from short-term and long-term inflation expectations indicate that the path ahead is still unclear. Consumers’ heightened long-term inflation expectations could suggest a lack of confidence in the ongoing policy measures to curb inflation robustly without hampering economic growth.
Deciphering these signals is crucial for policymakers, who must balance efforts to curb inflation without stifyling economic recovery. As the situation evolves, understanding the nuanced perspectives of different demographic groups will be key in crafting responses that are both effective and equitable. Rattled consumer sentiments, as highlighted in the survey, underscore the ongoing challenges in navigating the post-pandemic economic landscape.
