Americans are bracing for higher levels of inflation over the next few years amid a major jump in the expected price of gasoline, a report Monday from the Federal Reserve Bank of New York said.
In its October Survey of Consumer Expectations, survey respondents told the central bank that as of last month, they now see inflation a year from now at 5.9%, up from the 5.4% they projected in the September survey. Three years from now households see inflation at 3.1%, from September’s 2.9%, while five years from now inflation is seen at 2.4%, up from the prior month’s 2.2%.
The deterioration in the expected path of inflation last month may create new challenges for the Federal Reserve, which is now engaged in a very aggressive campaign of rate rises aimed at lowering price pressures from their highest readings in 40 years back to the official 2% target. Central bank officials contend that where the public sees inflation in the future has a strong influence on current inflation readings. The relative stability of expected levels of inflation, mainly over longer horizons, has given central bank officials confidence that the public retains faith in the Fed to get inflation down over time., New York Fed leader John Williams said “the importance of maintaining well-anchored inflation expectations is a bedrock principle of modern central banking.
The jump in the future path of inflation arrives as the latest data has pointed to a possible softening in inflation that may allow the Fed to slow the pace of its rate rises, which have been happening at a historically aggressive pace. On Thursday, the government reported that theThat data was cheered by economists and appeared in a week where
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