People shop at a supermarket in Montebello, California on August 23, 2022.
Frederic J. Brown | AFP | Getty Images
Lower gas prices are boosting optimism that inflation is on the wane, according to a survey by the New York Federal Reserve on Monday.
Respondents to the central bank’s August survey of consumer expectations said they expect an annual inflation rate of 5.7% a year from now. That’s down from 6.2% in July and the lowest level since October 2021.
Three-year inflation expectations fell to 2.8% in August from 3.2% the previous month. This was tied for the lowest level for the measure since November 2020.
The lowered outlook came amid a plunge in gasoline prices from more than $5 a gallon earlier in the summer, a nominal record high. The current national average is about $3.71 a gallon, still well above the price a year ago, but down 26 cents from the same point in August. according to AAA.
Consumers now expect gas prices to remain unchanged a year from now, according to a Fed survey. Food prices are expected to continue rising, but the expected annual increase of 5.8% is 0.8 percentage point lower than in July.
Rents are expected to rise 9.6%, down 0.3 percentage points from the July survey.
These numbers come as the Fed uses them a series of aggressive interest rate hikes to combat inflation still hovering near more than 40-year highs. The central bank is widely expected to approve a third straight 0.75 percentage point hike at its next meeting next week.
While consumers expect inflationary pressures to ease somewhat, they still think the cost of living will escalate.
Median expectations for household spending next year rose 1 percentage point to 7.8% in August, an increase in the outlook driven mostly by those with a high school education or less and a group largely made up of people with lower incomes.
In addition, respondents said that obtaining credit is now more difficult. Those who reported it was more difficult to get credit now rose to the top, with 57.8% saying it was either harder or much harder, the New York Fed said.
Those who expect to miss their minimum debt payment in the next three months also rose 12.2%, a gain of 1.4 percentage points, the highest since May 2020.
The Bureau of Labor Statistics will release the August consumer price index on Tuesday. Economists polled by Dow Jones expect CPI to have risen 8% from a year earlier, though they see a 0.1% drop from July. Excluding food and energy, core CPI is expected to rise 6% year-on-year and 0.3% month-on-month.