Inflation outlook rises, fueled by expected increases for housing costs, New York Fed survey shows

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The outlook increased across the one- and five-year horizons as respondents expressed little confidence the Fed will reach its 2% inflation goal anytime soon, a central bank survey showed. Respondents to the survey indicated they expect median home price growth of 3.3% over the next year, the highest reading since July 2022. College education costs are expected to increase by 9%, a 2.5 percentage point monthly surge. People shop at a grocery store in Monterey Park, California, on April 12, 2022. Frederic J. Brown | AFP | Getty Images

Consumers in April raised their expectations for price increases both in the near and longer term, fueled by higher inflation in home prices along with fuel and energy, according to a New York Federal Reserve survey released Monday.

The central bank’s New York district reported in its monthly Survey of Consumer Expectations that the outlook increased across the one- and five-year horizons as respondents expressed little confidence the Fed will reach its 2% inflation goal anytime soon.

On a one-year basis, the expectation increased to 3.3%, up 0.3 percentage point from March and the highest since November 2023. For the five-year outlook, the expectation rose to 2.8%, up 0.2 percentage points. However, at the three-year horizon, the outlook fell to 2.8%, down 0.1 percentage point.

The results mirror the University of Michigan sentiment survey released Friday that showed the one-year outlook for May at 3.5%, also up 0.3 percentage point, while the five-year outlook nudged higher to 3.1%.

All of the readings are well ahead of the Fed’s 2% goal and reflective of the stubborn nature of inflation this year following a substantial disinflationary trend in 2023.

Inflation pressures are expected to come from a wide variety of sources. However, expected increases in housing prices are particularly troublesome for policymakers who expected shelter costs to ease this year.

Respondents to the survey indicated they expect median home price growth of 3.3% over the next year, up 0.3 percentage point from a level that had remained steady for seven months. That was also the highest reading since July 2022 and boosted by those with a high school degree or less, a lower-income cohort of particular worry to Fed officials during a period of surging inflation that took off in early 2022.

Along with expected higher home costs, respondents

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The full article is available here. This article was published at CNBC Economics.