• Year-ahead inflation expectations climbed to 3.7% in June, the highest since September 2023, from 3.5% in May.
  • Three-year-ahead expectations also rose to 3.3% from 3.1%, while five-year expectations held steady at 3%.
  • Households grew more upbeat about their personal finances and labor market outlook, even as gas price expectations eased.

The Federal Reserve Bank of New York’s latest Survey of Consumer Expectations reveals conflicting signals on inflation. The median year-ahead inflation expectation surged to 3.7% in June, up from 3.5% in May and marking the highest level since September 2023. Similarly, the three-year-ahead measure rose to 3.3% from 3.1%, reaching its highest since June 2022, according to people familiar with the data. The five-year-ahead expectation remained unchanged at 3%, underscoring persistent long-run inflation above the Fed’s 2% target.

Despite the uptick in near- and medium-term inflation expectations, households reported improved sentiment on their current and expected financial situation. The survey showed a decline in gas price expectations, which fell to their lowest level since August 2022. Labor market expectations also brightened, with respondents more optimistic about job availability and income growth. “Households are feeling better about their financial standing, even as they brace for higher inflation ahead,” one economist noted.

The mixed data complicates the Fed’s path forward. While the rise in short-term expectations could stoke concerns about unanchored inflation, the easing of gas price forecasts and improved consumer sentiment may provide some relief. The central bank has maintained a data-dependent stance, and the survey results could influence the pace of any future rate adjustments. The New York Fed’s next release will be closely watched for further signs of whether inflation expectations are stabilizing or drifting higher.

Correction: An earlier version of this article misstated the month-over-year change for year-ahead expectations. The correct figure is 3.7% in June vs. 3.5% in May.