Inflation outlook rises, fueled by expected increases for housing costs, New York Fed survey shows

Consumers
in
April
raised
their
expectations
for
price
increases
both
in
the
near
and
longer
term,
fueled
by
higher

inflation
in
home
prices
along
with
fuel
and
energy,
according
to
a
New
York
Federal
Reserve
survey
released
Monday.

The
central
bank’s
New
York
district
reported
in
its
monthly

Survey
of
Consumer
Expectations
that
the
outlook
increased
across
the
one-
and
five-year
horizons
as
respondents
expressed
little
confidence
the
Fed
will
reach
its
2%
inflation
goal
anytime
soon.

On
a
one-year
basis,
the
expectation
increased
to
3.3%,
up
0.3
percentage
point
from
March
and
the
highest
since
November
2023.
For
the
five-year
outlook,
the
expectation
rose
to
2.8%,
up
0.2
percentage
point.
However,
at
the
three-year
horizon,
the
outlook
fell
to
2.8%,
down
0.1
percentage
point.

The
results
mirror
the

University
of
Michigan
sentiment
survey
released
Friday
that
showed
the
one-year
outlook
for
May
at
3.5%,
also
up
0.3
percentage
point,
while
the
five-year
outlook
nudged
higher
to
3.1%.

All
of
the
readings
are
well
ahead
of
the
Fed’s
2%
goal
and
reflective
of
the
stubborn
nature
of
inflation
this
year
after
a
substantial
disinflationary
trend
in
2023.

Inflation
pressures
are
expected
to
come
from
a
wide
variety
of
sources.
However,
expected
increases
in
housing
prices
are
particularly
troublesome
for
policymakers
who
expected
shelter
costs
to
ease
this
year.

Respondents
to
the
survey
indicated
they
expect
median
home
price
growth
of
3.3%
over
the
next
year,
up
0.3
percentage
point
from
a
level
that
had
remained
steady
for
seven
months.
That
was
also
the
highest
reading
since
July
2022
and
boosted
by
those
with
a
high
school
degree
or
less,
a
lower-income
cohort
of
particular
worry
to
Fed
officials
during
a
period
of
surging
inflation
that
took
off
in
early
2022.

Along
with
expected
higher
home
costs,
respondents
see
rents
rising
9.1%,
up
0.4
percentage
point
from
the
prior
month.

Fed
officials
at
their
most
recent
meeting
again
held
the
line
on
rates
and
said
they
need
to
see
more
compelling
evidence
that
inflation
is
moving
back
to
the
2%
goal
before
cutting.

Policymakers “continue
to
look
for
additional
evidence
that
inflation
is
going
to
return
to
our
2%
target,
and
until
we
have
that
I
think
it
is
appropriate
to
keep
the
policy
rate
in
restrictive
territory,”
Fed
Vice
Chair
Philip
Jefferson
said
Monday.

Consumers
see
medical
care
rising
8.7%
over
the
next
year,
up
0.6
percentage
point
from
the
March
survey.
They
expect
food
prices
to
increase
5.3%
(up
0.2
percentage
point
from
a
month
ago),
gasoline
to
rise
4.8%
(up
0.3
percentage
point)
and
college
education
to
climb
by
9%,
a
2.5
percentage
point
surge.

Employment
expectations
in
the
survey
were
mixed,
with
unemployment
seen
rising
though
the
perceived
probability
of
losing
one’s
job
declined.
However,
the
mobility
outlook
decreased,
with
50.9%
expecting
to
find
a
job
quickly
after
losing
their
current
job,
the
lowest
reading
since
April
2021.

The
survey
comes
two
days
ahead
of
the
closely
watched
Labor
Department
report
on
the
consumer
price
index,
due
to
be
released
Wednesday.
Economists
surveyed
by
Dow
Jones
expect
the
all-items
CPI
to
show
a
3.4%
increase
for
April
from
the
prior
year,
down
0.1
percentage
point
from
March.
Core
inflation,
excluding
food
and
energy,
is
projected
to
run
at
a
3.6%
12-month
rate.