U.S. consumers’ outlook for inflation was little changed in August, as households’ worries about the job market and the state of their personal finances mounted, the New York Federal Reserve said in a report on Tuesday.
The regional Fed bank’s latest Survey of Consumer Expectations showed respondents holding steady in August to projections of 3.6% inflation a year from now and 3% five years from now, while marking down expected inflation in three years to 3.2% from July’s 3.3%.
Respondents in August projected higher gasoline prices in a year, the report said.
While households’ inflation forecasts did not move much, their outlook on hiring and personal finances became more tenuous.
Survey respondents’ expectation of where the unemployment rate would be a year from now increased in August to its highest reading since April 2020, when the economy was being devastated by the COVID-19 pandemic. The report noted that this expectation was broad-based across age, income and education levels.
Expectations of losing a job, however, declined in August relative to July. The report said the probability of finding new work in the event of involuntary job loss also moved lower relative to the July survey.
Respondents in the August poll marked down assessments of their current and future financial situations as well as their views of credit access now and in a year.
Key Inflation Data Due This Week
The report was issued a week before the U.S. central bank is set to begin a two-day policy meeting. There is considerable uncertainty over what the Fed will do with its benchmark overnight interest rate, which is currently set in the 3.50%-3.75% range, as policymakers continue to struggle with inflation that remains well above the central bank’s 2% target.
Pivotal to the outcome of the September 15-16 policy meeting is the release on Friday of the Consumer Price Index for August. Several Fed officials have suggested that data could prove definitive in their policy decision.
Speaking at a Reuters NEXT Newsmaker event last Thursday, Fed Governor Christopher Waller said that when it comes to the upcoming inflation report, “if there is continued progress toward our 2% goal, then I am willing to support holding the policy rate at its current level.”
Other Fed officials, however, remain ready to hike rates.
In a posting on LinkedIn on Friday, Cleveland Fed President Beth Hammack, who voted in favor of a hike at the meeting in late July, said given the state of inflation faced by those in her district, “it’s time to act” to lower price pressures, indicating she’s still on board with a rate hike at next week’s meeting.
(Reporting by Michael S. Derby; Editing by Paul Simao)
