The New York Federal Reserve's August Survey of Consumer Expectations shows that U.S. households' inflation outlook was largely unchanged in August even as concerns about jobs and personal finances intensified, according to a report released on Tuesday.
Respondents in the regional Fed bank's monthly survey continued to expect inflation of 3.6% a year from now and 3.0% five years out. Expectations for inflation three years ahead edged down to 3.2% in August from 3.3% in July. The report also noted that respondents projected higher gasoline prices a year from now.
While measures of expected inflation were stable overall, the survey revealed a softer outlook on employment and household finances. The median expectation for where the unemployment rate would be a year from now rose in August to its highest level since April 2020 - the month when the economy was being hit by the COVID-19 pandemic. The report emphasized that this deterioration in unemployment expectations was broad-based across age, income and education cohorts.
At the same time, households' perceived risk of job loss actually fell in August relative to July. However, the report said the probability that respondents would find a new job if they experienced an involuntary job separation decreased from the prior month. This combination - lower perceived job-loss risk but weaker prospects for finding replacement work - points to mixed labor-market sentiment among surveyed households.
The survey also found consumers marking down both assessments of their current financial position and expectations for their finances in the year ahead. Evaluations of access to credit now and expectations for credit availability in a year likewise declined in August compared with July.
The New York Fed report was published a week before the U.S. central bank begins a two-day policy meeting. Policymakers remain uncertain about the next move for the federal funds rate, which is currently set in the 3.50% to 3.75% range, as inflation continues to run well above the Fed's 2% target.
Central to the upcoming Federal Open Market Committee decision is the release of the August Consumer Price Index on Friday. Several Fed officials have signaled that the CPI outcome could materially influence their views and the policy decision at the September 15-16 meeting.
Speaking last Thursday at a Reuters NEXT Newsmaker event, Fed Governor Christopher Waller said: "if there is continued progress toward our 2% goal, then I am willing to support holding the policy rate at its current level." By contrast, other officials remain ready to raise rates. In a LinkedIn posting on Friday, Cleveland Fed President Beth Hammack - who supported a rate increase at the Fed's late July meeting - said that given the state of inflation in her district, "it's time to act," indicating she continues to favor a rate hike at next week's meeting.
Taken together, the New York Fed's consumer survey and the calendar of forthcoming economic data create a narrow window in which incoming evidence on inflation and household conditions can sway monetary policy deliberations. For markets and businesses sensitive to interest-rate moves, the survey underscores persistent inflation expectations alongside growing concern about labor-market durability and household finances.
Policymakers will be watching the CPI print closely for signs of sustained progress toward the 2% inflation target, while also weighing the weakening tone in households' financial and employment outlooks reported by the New York Fed.