According to a survey by the New York Federal Reserve, lower gas prices are increasing optimism that inflation is on the decline.
According to the central bank's August Survey of Consumer Expectations, respondents think the annual inflation rate will be 5.6% a year from now. It was the lowest level since October 2021.
The three-year inflation expectations dropped in August. That was tied for the lowest level in more than a year.
There was a tumble in gasoline prices from a record high earlier in the summer. The current national average is still more than a year ago, but it is 26 cents less than it was in August.
According to the Fed survey, consumers think gas prices will stay the same in a year's time. Food prices are expected to go up, but at a slower rate than in the past.
Rents are expected to increase 9.6%, but that is a decrease from the previous survey.
The Fed is using a series of aggressive interest rate hikes to fight inflation that is close to a 40-year high. The central bank is expected to approve another 0.75 percentage point increase next week.
Consumers think the cost of living will go up even though they think inflation pressures are going to go down.
Median expectations for household spending over the next year rose 1 percentage point to 7.8% in August, an increase in outlook driven largely by those with a high school education or less.
Credit is hard to come by now according to respondents. The New York Fed reported that the number of people saying it is harder to get credit has risen to a series high.
The rise in those expecting to miss a minimum debt payment was the highest in over a year.
The consumer price index reading will be released on Tuesday. The economists think that the consumer price index will have risen 8% from a year ago, though they think it will have fallen from July. Excluding food and energy, the core inflation rate is expected to go up.
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