The New York Fed's September survey shows one-year expectations up 0.3 point and spending plans at a three-year high, while the five-year reading held at 3.0%. Households also see their own paychecks growing more slowly.
Households are bracing for higher prices over the coming year. Over a five-year horizon, they are no more worried than they were a month ago.
The Federal Reserve Bank of New York's Survey of Consumer Expectations for September showed median expected inflation one year ahead rising 0.3 percentage point to 3.9%, the highest reading since May 2023. Economists had expected about 3.6%. Three-year expectations rose 0.1 point to 3.3%. Five-year expectations were unchanged at 3.0%.
The gap between the one-year and five-year readings is now 0.9 percentage point. Respondents disagreed with each other more at every horizon, and their uncertainty about the outlook rose at one and three years.
Where people see prices rising
Expected price increases for specific items rose across most of the basket. Respondents expect gasoline prices to climb 4.8% over the next year and food 5.5%, each up 0.2 point from August. Rent expectations rose to 6.8%. Expected college costs jumped 1.4 points to 7.5%, and medical care stood at 9.2%.
Spending and pay
The survey also points to households planning to keep spending. Expected growth in household spending rose 0.3 point to 5.5%, the highest since May 2023. Expected income growth reached 3.1%, the highest since February 2025.
Expected earnings growth, the measure tied most directly to wages, fell 0.3 point to 2.6%. Set against 3.9% inflation expectations, that implies respondents see their pay falling behind prices by about 1.3 percentage points over the next year. Expected spending growth runs 2.4 points ahead of expected income growth.
The labor market
Respondents were more confident about their jobs. The average perceived chance of losing a job in the next 12 months fell to 13.5%, the lowest since December 2024. The perceived chance of finding a new job if one were lost stood at 46.1%. The probability that the U.S. unemployment rate will be higher a year from now slipped 0.5 point to 43.9%. Perceptions of access to credit worsened.
The Fed connection
The release came four hours before the minutes of the Fed's September meeting, which recorded some officials worrying that "after more than five years of inflation above 2 percent, elevated inflation rates could begin to affect inflation expectations and wage- and price-setting decisions." Wednesday's survey contains evidence on both sides of that concern.
One reading is that short-run expectations are drifting up with fuel and food prices and that households intend to spend through it, which is the combination that can feed into price-setting. Another reading is that the five-year measure has not budged and earnings expectations fell, so the feedback from expectations into wages that officials fear does not appear in this survey.
Next readings
The University of Michigan's preliminary October survey on Friday includes its own inflation-expectations questions. A second survey showing a rise in short-term expectations alongside a stable long-term view would confirm the split. Any increase in the five-year figure in either survey would change the picture more than another move in the one-year number.