Inflation expectations at record level as country grapples with higher prices

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Short-term inflation expectations are at their highest levels since the Federal Reserve Bank of New York began surveying consumers nearly a decade ago.

The regional Fed bank released its October Survey of Consumer Expectations Monday and found that median expectations are that prices will rise by 5.7% over the next year, a 0.4% increase from the previous month and a record since the metric began to be analyzed in 2013.

“The increase in the short-term measure was the series’ twelfth consecutive increase and was most pronounced for respondents who have at least a college degree and those between ages 40 and 60,” it said in a news release.

While short-term expectations rose since September, expectations for the next three years remained stable after hitting a record 4.2% that month.

FED TAKES FIRST STEP TOWARD RAISING INTEREST RATES

Inflation rose 5.4% for the year ending in September, the highest pace since 2008, the Labor Department announced last month. Prices also rose at the highest rate in 30 years in the gauge that the Federal Reserve favors.

During its last meeting, the Federal Reserve’s monetary policy committee upped its predictions for this year’s inflation to 4.2%, compared to its June forecast of 3.4%. However, it expects prices to settle down to 2.2% next year. The Fed has consistently said it wants inflation running above 2% and full employment before it hikes interest rates, and while inflation has breached that goal for months, the United States is still millions of jobs short compared to before the pandemic.

The central bank has put much of the onus for the higher prices on supply chain problems, which are negatively affecting the balance of the country’s supply and demand.

“Like most forecasters, we continue to believe that our dynamic economy will adjust to the supply and demand imbalances and that, as it does, inflation will decline to levels much closer to our 2% longer-run goal,” Fed Chairman Jerome Powell said last week. “Global supply chains are complex — they will return to normal function. But the timing of that is highly uncertain.”

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The latest consumer price index numbers from the Bureau of Labor Statistics will be released on Wednesday, and forecasters expect them to edge slightly higher than last month.

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