New York Fed Reports Highest Inflation Expectations Since 2023

The Federal Reserve Bank of New York reported that median one-year inflation expectations rose to 3.9% in its September Survey of Consumer Expectations. This figure represents a 0.3 percentage point increase from August and marks the highest level of short-term inflation fear since May 2023.

Rising inflation expectations coincided with an increase in expected household spending growth, which reached 5.5%. In contrast, longer-term outlooks remained stable, with the five-year inflation expectation holding steady at 3%. The survey also noted a shift in labor market sentiment, as consumers reported a lower probability of job loss and a higher likelihood of voluntarily quitting their positions.

These findings arrive as the Federal Open Market Committee evaluates monetary policy while inflation continues to exceed the 2% target. While markets generally expect benchmark interest rates to remain steady at the upcoming October meeting, bond market indicators and futures contracts suggest a more aggressive rate environment over the long term.