Fed survey finds ebbing inflation expectations

Americans are expecting declines in future levels of inflation in the coming months, a survey from the Federal Reserve Bank of New York showed.

In November, consumers expect the inflation rate a year from now and three years from now to be 5.2% and 3%, respectively. That’s down from the 5.9% and 3.1% they predicted in the October survey. It’s the steepest month-to-month fall in inflation expectations since 2013.

Respondents did put a slightly lower number on their outlook for five-year inflation, moving their forecast to 2.3%, down 0.1% from October. 

The Fed is keeping a close eye on inflation expectations and is trying to get price growth under control. Increased inflation expectations could cause the cost of labor to go up and, in turn, cause prices to rise. 

Consumers are being more optimistic about their income outlook. Their expectations for household income growth are at record-high levels now. However, respondents still expect home price growth to slow.