Customers shop for groceries at a supermarket in Chicago, Illinois on June 10, 2021.
Scott Olson | Getty Images
Despite assurances from the Federal Reserve that current inflationary pressures will not last, consumers see things differently, according to a survey by the central bank’s New York district on Monday.
The June consumer expectations poll showed that average inflation expectations rose to 4.8% over the next 12 months, a 0.8 percentage point increase from May and the highest in history for a range that goes back to 2013 .
The outlook for the next three years remained unchanged at 3.6%, but is still well above the 2% level that the Fed considers healthy for a growing economy.
Central bank officials have insisted the recent surge in inflation will not last. At their June meeting, they forecast that their preferred measuring device would show an increase of 3% in 2021, but would then decrease to 2.1% in the following years and then level off around the target range.
A Fed report released on Friday, which Chairman Jerome Powell will present to Congress this week, reiterated the central bank’s position that current inflationary pressures are “transitory,” largely due to supply chain bottlenecks and other factors likely to be easing when the economy returns to its posts – pandemic normal.
More inflation indicators are on the way this week. The June consumer price index, which has less influence on the Fed’s decision-making than the consumer spending index, is expected to show an annual gain of 5%, its highest level since May 2008. With food and energy prices volatile, the CPI expected to rise by 4% from its highest level since January 1992 of 3.8%.
Consumers polled by the New York Fed expect the rise in home prices to continue at an annual rate of 6.2%, as in May, although the area of uncertainty around this forecast was the highest in the history of the series.
Workers are seeing wages grow 2.6% on a 12-month basis, the highest since the pandemic began in March 2020.
Expectations that the unemployment rate will be higher in a year fell to 30.7%, the lowest level in the series’ history.
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