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INFLATION OUTLOOK RISES, FUELED BY EXPECTED INCREASES FOR HOUSING COSTS, NEW
YORK FED SURVEY SHOWS

Published Mon, May 13 2024 11:00 AM EDTUpdated 4 Min Ago
Jeff Cox
@JeffCoxCNBCcom@jeff.cox.7528
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KEY POINTS
 * 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.



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.


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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 point. 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 after 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 see rents rising 9.1%, up 0.4
percentage point from the prior month.

Fed officials at their most recent meeting again held the line on rates and said
they need to see more compelling evidence that inflation is moving back to the
2% goal before cutting.

Policymakers "continue to look for additional evidence that inflation is going
to return to our 2% target, and until we have that I think it is appropriate to
keep the policy rate in restrictive territory," Fed Vice Chair Philip Jefferson
said Monday.

Consumers see medical care rising 8.7% over the next year, up 0.6 percentage
point from the March survey. They expect food prices to increase 5.3% (up 0.2
percentage point from a month ago), gasoline to rise 4.8% (up 0.3 percentage
point); and college education to increase by 9%, a 2.5 percentage point surge.

Employment expectations in the survey were mixed, with unemployment seen rising
though the perceived probability of losing one's job declined. However, the
mobility outlook decreased, with 50.9% expecting to find a job quickly after
losing their current job, the lowest reading since April 2021.

The survey comes two days ahead of the closely watched Labor Department report
on the consumer price index, due to be released Wednesday. Economists surveyed
by Dow Jones expect the all-items CPI to show a 3.4% increase for April from the
prior year, down 0.1 percentage point from March. Core inflation, excluding food
and energy, is projected to run at a 3.6% 12-month rate.


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