According to a key Federal Reserve Bank of New York survey released on Monday, Americans’ inflation fears surged again in March, with concerns about rising costs reaching their highest level in more than a decade.
Worries are increasing over inflation, with new Federal Reserve data showing a record-high fear over surging prices.
The median expectation is that inflation will be up 6.6 percent in a year, surpassing an 11-year high set in February. Consumers expect inflation to reach 3.7 percent in three years, down from 3.8 percent the previous month and well below the peak of 4.2 percent in late 2020.
“Median inflation uncertainty—the degree of doubt indicated about future inflation outcomes—increased at the short-term horizon, hitting a new series high,” according to the survey. “Median inflation uncertainty remained unchanged at a series high over the medium term.”
Consumers have raised their inflation forecasts for the coming year, believing that items such as gasoline, food, medical care, rent, and college tuition will become more expensive for them to purchase.
A rotating panel of 1,300 households used to compile the study survey is crucial in assessing how the Federal Reserve will respond to the recent inflation increase. That’s because actual inflation is influenced, at least in part, by consumer expectations.
It’s a self-fulfilling prophecy: if everyone expects prices to rise by 3% this year, it signals to businesses that they can raise prices by at least that much. To compensate for the growing costs, workers will want a 3% salary increase.
During the central bank’s March policy-setting meeting, Chairman Jerome Powell expressed concern that a recent oil and gas price surge sparked by Russia’s war in Ukraine could drive already high costs much higher, rising consumer inflation expectations.
“The risk of an extended period of high inflation pushing longer-term expectations uncomfortably higher is rising,” Powell warned.
The poll comes only one day before the Labor Department issues the latest consumer price index number, which is expected to be yet another surprise. Economists predict that the index will rise beyond 8%, setting a new 40-year high.