Falling gas prices are raising hopes that inflation is slowing, New York Fed survey shows

One person pulls out the Nozel at a station’s pump on July 29th, 2022 in Arlington.
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A survey by the New York Federal Reserve Monday found that lower gasoline prices raise optimism that inflation will fall.

The August Survey of Consumer Expectations by the central bank found that respondents expected the annual inflation rate of 5.7% in the year ahead. It is down from 6.2% in June and at its lowest since October 2021.

From 3.2% in the month before, three-year inflation expectations fell to 2.8% for August. It was also the lowest reading for this measure since November 2020.

The lower outlook was caused by a fall in gasoline prices that reached more than $5 per gal earlier this summer. This is not a record. Although it’s still high, the current average national gasoline price is $3.71 per gallon. This is a significant drop from August when the price was the same. according to AAA.

According to the Fed survey, this means that consumers expect gasoline prices to remain unchanged in a year. Although food prices will continue to rise, the Fed survey shows that consumers expect gas prices to remain unchanged in one year. However, it is expected that they will increase by 5.8% in one-year. This figure is just 0.8 percentage points less than July.

However, rents are expected to rise by 9.6%. This is still 0.3 percentage points less than the July survey.

These numbers are provided by the Fed. a series of aggressive interest rate hikes To combat inflation, which is at an all-time high of more than 40 years. It is expected that the central bank will approve another 0.75 percentage points increase next week.

Living costs are rising

Consumers expect that inflation pressures will ease slightly, but they believe the cost of living is going to rise.

The median household expectations of spending in the coming year increased 1 percentage point, to 7.8% in august. This increase was largely driven by people with a high school diploma or less and an overwhelmingly lower-income group.

Respondents said that it is becoming harder for them to get credit. According to the New York Fed, 57.8% reported it is harder to obtain credit now.

Additionally, the number of people who expected to default on minimum debt payments in the following three months increased 12.2%. This was an increase of 1.4 percent, the largest reading since May 2020.

On Tuesday, the Bureau of Labor Statistics will publish August’s consumer price index reading. Dow Jones surveyed economists and they expect CPI to rise 8% over a year, although the reading will show a 0.1% decline from July. The core CPI will rise by 6% annually and 0.3% per month if food and energy are excluded.

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