Consumers are expecting inflation to improve in the coming months, according to new survey data from the Federal Reserve Bank of New York.
In November, consumers’ median inflation expectations for the next year and three years out were 5.2% and 3%, respectively. That’s down from October’s median expectations of 5.9% and 3.1%.
It’s the largest month-to-month drop in year-ahead inflation expectations since the Survey of Consumer Expectations launched in 2013, according to the New York Fed.
Expectations for inflation five years from now fell by 0.1 percentage points to 2.3%, according to the Fed survey.
Consumers’ expectations about inflation are being watched closely by the Fed as it engages in a long battle to bring down high prices. Higher inflation expectations could lead to an increase in workers bargaining for higher wages which, in turn, could drive pricing upward.
The survey also showed improvement in respondents’ sentiments about the labor market. Mean expectations for higher unemployment declined by 0.7 percentage points to 42.2%, and the mean perceived probability of finding a job increased while the probability of voluntarily leaving a job decreased.
Consumers’ expectations for household income growth increased to a series high, the New York Fed noted. Home price growth expectations, however, continued to decline.
The Fed likely will closely review this information — and Tuesday’s latest Consumer Price Index data — when officials meet for their last policymaking meeting of the year on Tuesday and Wednesday. The central bank is expected to raise its benchmark lending rate for a seventh consecutive time. Economists are anticipating a half-point rate hike.
—CNN’s Matt Egan contributed to this report.
