Inflation expectations for next year surge to record high

Inflation expectations for the next year climbed for a seventh straight month in May to a record high, according to a new survey from the Federal Reserve Bank of New York.

Median one-year ahead inflation expectations last month rose 0.6 percentage points to 4%, the highest since the New York Fed’s Survey of Consumer Expectations began. Inflation expectations for the next three years climbed from 3.1% to 3.6%, trailing only the August 2013 print. 

Respondents over 60 years of age and those earning a high school degree or less were most concerned about future inflation. 

The internet-based survey consists of a rotating panel of approximately 1,300 household heads who participate for up to a year with a roughly equal number rotating in and out each month. 

OIL PRICES REACH HIGHEST LEVEL IN OVER 2 YEARS AS DEMAND REBOUNDS

Inflation expectations over the short-term have in recent months been in increasing at a faster pace than for the medium-term. The 0.4 percentage point difference between the two is the biggest spread on record. 

The gap comes as the Fed has said it expects inflation pressures to be "transitory" due to a base effects skew that occurred when prices declined at the start of the pandemic. 

Median year-ahead home price change expectations rose 0.7 percentage points to 6.2%, hitting a record high for a third straight month. Respondents in the West and South regions were most worried about home price gains. 

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Respondents also expect prices for all commodities to increase over the next year. The median year-ahead expected change in food prices increased 2.2 percentage points to a record high 8% while the one-year ahead expected change in the price of gas rose 0.6 percentage points to 9.8%.

The median one-year ahead expected change in rent ticked up 0.3 percentage points to a record high 9.7%.