Near-term inflation expectations hit record high, New York Fed survey shows

A woman shops in a supermarket as rising inflation affects consumer prices in Los Angeles, California, June 13, 2022.

According to a survey from the New York Federal Reserve, consumers expect inflation to hit a record high in the next year.

The one-year outlook for inflation increased to 6.8% in June, a 0.2 percentage point monthly gain and the highest in a data series that dates back to June 2013).

Expectations decreased over time. The three-year outlook fell to 3.6% from 3.9% a month ago.

The Survey of Consumer Expectations is happening at a time when the Fed is raising interest rates. Fed officials have raised benchmark short-term borrowing rates 1.5 percentage points this year and have indicated more increases are coming until inflation shows signs of a decline

Expectations for years ahead remain well ahead of the Fed's 2% long-run inflation goal despite some confidence that tighter monetary policy will have some impact.

The outlook for home prices fell dramatically when participants expected prices to keep rising.

The median expected change in home prices for the next year fell to 4.4%, the lowest survey reading since February 2021. The May survey showed a 5.8% increase.

The employment picture made people anxious.

The unemployment rate will be higher a year from now, with the mean probability rising to 40.4%, the highest level in over a year. The New York Fed states that the reading is still well behind the pre-pandemic level of 13.8%.

In May, household spending growth expectations hit an all-time high of 8.4%, but have since retreated.

June's consumer price index is expected to show a year-over-year increase of 8.8%, up from 8.6% in May, according to estimates by the Wall Street Journal.