The Federal Reserve Bank of New York’s latest Survey of Consumer Expectations for January 2025 indicates that while short- and medium-term inflation expectations remain stable at 3.0%, long-term expectations have edged up to 3.3%, the highest since June 2008. This uptick is primarily driven by respondents with a high school education or less.
The survey also highlights a broad increase in commodity price expectations. Notably, anticipated price changes for gas rose by 0.6 percentage points to 2.6%, food by 0.6 points to 4.6%, medical care by 1.0 point to 6.8%, education by 0.2 points to 5.9%, and rent by 0.5 points to 6.0%.
Labor market expectations present a mixed picture. The perceived probability of job loss in the next 12 months increased by 2.3 percentage points to 14.2%, while the probability of finding a job after losing one rose by 1.3 points to 51.5%. Unemployment expectations decreased to 34.0%, the lowest since July 2021.
Household spending growth expectations declined by 0.4 percentage points to 4.4%, marking the lowest level since January 2021. This decline was consistent across various demographics.
Economists caution that recent tariff policies could exacerbate inflationary pressures. Tariffs tend to raise prices on imported goods, which can boost inflation, thereby potentially forcing the Federal Reserve to maintain higher interest rates instead of lowering them.
As the economic landscape evolves, the interplay between consumer expectations, labor market dynamics, and policy decisions will be crucial in shaping the nation’s financial future.
