April 1, 2023

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The New York Fed survey showed that lower gas prices raise hopes that inflation is slowing

The New York Fed survey showed that lower gas prices raise hopes that inflation is slowing

People shop at a supermarket in Montebello, California, on August 23, 2022.

Frederick J. Brown | AFP | Getty Images

Lower gas prices have fueled optimism that inflation is declining, according to a survey conducted by the Federal Reserve in New York on Monday.

Participants in the central bank’s August survey of consumer expectations indicated that they expect annual inflation to reach 5.7% annually from now. This is down from 6.2% in July and the lowest since October 2021.

Three-year inflation expectations fell to 2.8% in August from 3.2% the previous month. This was tied to the lowest level of this measure since November 2020.

The lower forecast came amid a dip in gasoline prices from more than $5 a gallon earlier in the summer, a record high. The current national average is about $3.71 a gallon, still well above the price a year ago, but about 26 cents off the same point in August, According to AAA.

Along those lines, consumers now expect little change in gas prices a year from now, according to the Fed’s survey. Food prices are expected to continue rising, but the projected 5.8% increase a year from now is 0.8 percentage points lower than it was in July.

Rents are expected to rise 9.6%, but that’s a 0.3 percentage point drop from the July survey.

These numbers come as used by the Fed A series of sharp increases in interest rates To fight inflation, which is still near its highest level in more than 40 years. The central bank is widely expected to approve a third consecutive increase of 0.75 percentage points when it meets again next week.

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high cost of living

While consumers expect inflation pressures to ease somewhat, they still believe that the cost of living will escalate.

The median forecast for household spending over the next year rose by one percentage point to 7.8% in August, an increase in expectations driven largely by those with a high school education or less and a group made up largely of those with lower incomes.

Moreover, survey respondents said it is difficult to get credit now. The New York Fed reported that those who reported it was now difficult to get credit rose to a high streak, with 57.8% stating it was either much harder or harder.

Also, those who expect to not pay the minimum debt repayment over the next three months rose 12.2%, an increase of 1.4 percentage points and the highest reading since May 2020.

On Tuesday, the Bureau of Labor Statistics will release its CPI reading for August. Economists polled by Dow Jones expect the CPI to rise 8% from a year ago, although they see a 0.1% decline from July. Excluding food and energy, core CPI is expected to rise 6% year over year and 0.3% monthly.