Despite the Middle East wars and tariffs pushing up current inflationary pressures, the New York Fed's April consumer survey showed that Americans' expectations for three- and five-year inflation remained stable. This contrasts sharply with the University of Michigan's consumer confidence survey and the significant deterioration in market expectations, providing some support for the Fed's policy easing.
A consumer expectations survey released by the New York Federal Reserve on Thursday showed that respondents expect inflation to be 3.6% a year from now, a slight increase from 3.4% in March; while three-year and five-year inflation expectations were 3.1% and 3% respectively, indicating that public concerns about long-term runaway inflation have not yet intensified significantly.
Respondents' expectations for gasoline price increases over the next year also fell sharply from 9.4% in March to 5.1%, while expectations for food prices also eased.
The survey results came as inflationary pressures rose in the United States. The Personal Consumption Expenditures (PCE) price index rose 3.5% year-on-year in March, up from 2.8% in February and also above the Federal Reserve's 2% target. Coupled with the impact of tariffs and oil prices, several Federal Reserve officials have publicly opposed future interest rate cuts, with some even suggesting that raising interest rates should be considered to curb inflation.
Long-term expectations remain stable, while short-term expectations are slightly upward.
A New York Fed survey in April showed that respondents’ one-year inflation expectations rose to 3.6%, reflecting a moderate increase in inflation expectations in the short term.
However, the three-year and five-year forecasts remained at 3.1% and 3% respectively, indicating that the public does not believe that the current price pressures will evolve into persistent long-term inflation.
This result is of great significance to the Federal Reserve.
New York Federal Reserve President John Williams said on Monday, ahead of the release of the survey:
"Despite a series of shocks, inflation expectations have remained well anchored, which is crucial because, under unexpected shocks and extreme uncertainty..."Well-anchored expectations are crucial for ensuring price stability."
There are disagreements with other indicators
The New York Fed's survey remained relatively stable, showing a clear divergence from other indicators. The University of Michigan's April consumer confidence survey revealed a significant deterioration in both three-year and five-year inflation expectations, while market expectations for the long-term inflation path have also shifted upward.
Meanwhile, data released by the New York Federal Reserve on Wednesday showed that supply chain disruptions have increased significantly, comparable to the impact during the COVID-19 pandemic, constituting another channel for the transmission of inflationary pressures.
Regarding oil prices, analysts believe that regardless of how the situation evolves, oil tankers from the Gulf region will still need several weeks to reach refiners around the world, and the tight supply situation is unlikely to ease in the short term.
Regarding personal finances, respondents had mixed feelings about their current and future personal and family finances, and believed that access to credit had become more difficult compared to March.
Regarding employment expectations, respondents had differing views on the prospects for hiring and salary income, and anticipated that the unemployment rate would rise a year later, reflecting the public's cautious attitude towards the macroeconomic outlook.
