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NY fed inflation expectations 3 year data, percentage consumer rate senate bill

On Monday, May 2, 2022, people are shopping in a grocery store in San Francisco, California, United States.
On Monday, May 2, 2022, people are shopping in a grocery store in San Francisco, California, United States.
Consumers think inflation will go down, which is great news for the Fed.

In July, people's expectations for inflation went down a lot. This was due to a sharp drop in gas prices and a growing belief that the fast rises in food and housing prices would also slow down in the future.

In the New York Federal Reserve's monthly Survey of Consumer Expectations, people said they thought inflation would go up at a rate of 6.2% over the next year and 3.2% over the next three years.

Even though these numbers are still very high compared to the past, they are a big drop from the June survey results of 6.8% and 3.6%, respectively.

The Bureau of Labor Statistics says that food prices have gone up by 10.4% in the past year, from June to June. They are still expected to go up 6.7% in the next 12 months, but this is a drop of 2.5 percentage points from the survey in June. This is the biggest drop in a data set that goes back to June 2013.

In the same way, people think that gas prices, which have gone up 60% in the past year, will only go up by 1.5% in the next year. This is a drop of 4.2 percentage points from June and the second-biggest monthly drop in the survey's history.

A man wearing a mask walks past the U.S. Federal Reserve building in Washington D.C., on April 29, 2020.
A man wearing a mask walks past the U.S. Federal Reserve building in Washington D.C., on April 29, 2020.

AAA says that the price of regular gas has gone down about 67 cents per gallon in the past month, but it is still 87 cents more than it was a year ago. Overall, the prices of commodities have also been falling by a lot.

Lastly, home prices are expected to go up by 3.5 percent from June's increase of 4.4 percent. This is the smallest increase expected since November 2020.

Inflation expectations for the next five years also went down by 0.5 percentage points, to 2.3 percent.

The results come at a time when the Fed has been aggressively raising interest rates to slow inflation, which is at its highest level in more than 40 years. In 2022, the central bank has raised benchmark rates four times for a total of 2.25 percentage points. CME Group data shows that the market is pricing in a third straight 0.75 percentage point increase in September.

But the July results from the New York Fed could give policymakers a reason to slow down, if not in September, then later in the year if inflation data is on their side. Long-term, the Fed wants inflation to be around 2%, so the levels predicted by the survey are still well above what the Fed is comfortable with.

Federal Reserve Chairman Jerome Powell speaks to the Senate Banking, Housing and Urban Affairs Committee, as he presents the Monetary Policy Report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington.
Federal Reserve Chairman Jerome Powell speaks to the Senate Banking, Housing and Urban Affairs Committee, as he presents the Monetary Policy Report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington.

Fed Governor Michelle Bowman said over the weekend that she doesn't think inflation will go down any time soon and that rates need to keep going up. President of the San Francisco Fed Mary Daly agreed, saying that the rate hikes are "far from done."

These comments came after the BLS on Friday reported much higher numbers for payroll growth (528,000) and wages, with the average hourly wage going up by 5.2 percent.

The New York Fed survey also showed that growth in household spending is expected to slow down to 6.9% over the next year. In the long run, that's also a pretty high number, but it's a long way below May's record-high 9 percent. The 1.5 percentage point drop from one month to the next is the biggest drop in the history of the survey.

During the same month that the S&P 500 went up 9%, consumers also became a little more optimistic about stock prices. Now, 34.3 percent of consumers expect prices to go up over the next 12 months.

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