Short-term inflation expectations held steady in December after rising steadily for more than a year and consumers became more optimistic about their job prospects, according to a survey released by the New York Federal Reserve on Monday.
Median expectations for what inflation will be in one year were unchanged at 6.0% after 13 straight months of increases, according to the New York Fed’s monthly survey of consumer expectations. Consumers’ expectations of what inflation could be in three years also stayed steady at 4.0%, the survey showed.
Consumers lowered their expectations for how much the prices of essential items will rise in the year ahead. They said they expect the price of gas to rise by 5.7% in a year, down from 9.2% in November, and for food prices to rise by 7.8%, down from 9.2%.
Fed officials are considering whether they need to raise interest rates sooner than expected and may begin reducing their bond holdings later this year to respond to high inflation and a “tight” labor market, according to minutes from the Fed’s Dec. 14-15 meeting released last week.
The New York Fed survey, which is based on a rotating panel of approximately 1,300 households, showed consumers are also more optimistic about the labor market.
The perceived odds of losing a job over the next 12 months fell to an average 11.6% in December from 12.9% in November. And the average perceived chance of being able to find a new job after becoming unemployed rose to 57.5% in December from 55.9% in November – reaching the highest level since the pre-pandemic level of 58.7% in February 2020.