Inflation Expectations Hit Record High in Fed Survey

The expectations for inflation among American consumers continued to climb in September, a Federal Reserve Bank of New York survey showed Tuesday.

U.S.  household expectations for inflation one year from now rose to 5.3 percent in September, up a tenth of a percentage point from the prior month, the New York Fed’s monthly Survey of Consumer Expectations revealed.

Both marked the year ahead and three-year readings are the highest on record in the survey’s eight-year history.

The results indicate that Americans do not believe the current bout of inflation is likely to fade quickly

Federal Reserve officials watch inflation expectations closely because they believe expectations are a key factor in determining the course of prices in the future.

In a speech to the Peterson Institute for International Economics on inflation on Tuesday, Atlanta Fed president Raphael Bostic said that it is becoming increasingly clear that the intense and widespread supply chain disruptions that have animated price pressures will not be brief. As a result, inflation is likely to stay elevated for quite some time.

What’s more, the longer the supply bottlenecks and attendant price pressures last, the more likely they will shape the expectations of consumers and businesspeople, shifting their views on pricing and wages in particular.

“We have not seen this sort of broad-based and sudden surge in inflation readings since the Great Inflation of the 1970s,” Bostic said. “Certainly, it’s too early to proclaim we are witnessing a wage-price spiral like the one that led to the Great Inflation. But conditions merit watching, and my staff and I are doing just that.”

Inflation expectations are highest among those over 59 years old but are extremely elevated among all age groups.