A New York Federal Reserve survey released Tuesday shows consumers are bracing for inflation to remain above the central bank's 2% target in the long term.
Americans are bracing for high inflation to stick around over the next few years, according to a key Federal Reserve Bank of New York survey published Tuesday. The median expectation is that the inflation rate will be up 3.7% one year from now, according to the New York Federal Reserve's Survey of Consumer Expectations, down from a high of 7.1% recorded in June 2022. That marks a slight increase from the 3.6% recorded last month.
The survey, which is based on a rotating panel of 1,300 households, plays a critical role in determining how Fed policymakers respond to the inflation crisis. That is because actual inflation depends, at least in part, on what consumers think it will be. It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs.
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