The New York Fed’s September Survey of Consumer Expectations, released Wednesday, showed median one-year inflation expectations up 0.3 point to 3.9 percent, the highest since May 2023, with inflation uncertainty rising at the one- and three-year horizons. Three-year expectations edged to 3.3 percent; the five-year view was unchanged at 3.0 percent, so the longer-term anchor is holding for now. Expected price changes rose across every category the bank tracks: gasoline 4.8 percent, food 5.5 percent, medical care 9.2 percent, college 7.5 percent (up 1.4 points), and rent 6.8 percent.
The labor-market side actually improved. Expected earnings growth slipped to 2.6 percent, but the perceived probability of job loss fell to 13.5 percent, the lowest since December 2024, and the chance of finding a job if laid off rose to 46.1 percent. The tension is on the household-finance side: expected spending growth jumped 0.3 point to 5.5 percent, also the highest since May 2023, while households reported worse current and expected financial situations, saw credit access deteriorate, and now expect government debt to grow 9.9 percent over the next year. The share expecting stock prices higher in a year fell to 40.2 percent.
For the Fed, this is the expectations channel it fears most. The minutes showed participants worried that after more than five years above 2 percent, elevated inflation could start affecting expectations and wage- and price-setting; the survey shows it happening at the short end. A stable 5-year at 3.0 percent limits the alarm for long bonds, but 3.9 percent at one year with spending running hot is the case for the December hike Waller described.