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Americans expect high inflation to linger in latest New York Fed survey
Former Kansas City Federal Reserve Bank President Thomas Hoenig reacts to Jerome Powell saying the Fed is not ready to start cutting rates on ‘Cavuto: Coast to Coast.’
Americans are bracing for high inflation to stick around over the next few years, according to a key Federal Reserve Bank of New York survey published Monday.
The median expectation is that the inflation rate will be up 3% one year from now, according to the New York Federal Reserve’s Survey of Consumer Expectations, unchanged from the previous months.
Consumers also anticipate that inflation will remain abnormally high in the coming years, projecting that it will hover around 2.7% three years from now – up from January’s 2.4% – and rise even further to 2.9% five years from now, according to the survey.
That remains above the Fed’s 2% target, indicating that sticky inflation could be here to stay. By comparison, central bank policymakers projected in their latest economic forecasts that inflation will fall to 2.1% by 2025 and eventually settle around 2% in 2026.
POWELL SAYS FED WON’T RUSH TO CUT INTEREST RATES UNTIL INFLATION IS CONQUERED
A woman shops for groceries at a supermarket in Monterey Park, California on October 19, 2022. ((Photo by FREDERIC J. BROWN/AFP via Getty Images) / Getty Images)
Americans expect the cost of gasoline to rise slightly over the next year. However, they predicted the price of other necessities like medical care and rent to fall in the year ahead. Consumers anticipate that the cost of groceries will remain unchanged at 4.9%.
The survey, based on a rotating panel of 1,300 households, plays a critical role in determining how Fed policymakers respond to the inflation crisis.
FED’S FIGHT AGAINST INFLATION IS WEIGHING ON MIDDLE-CLASS AMERICANS
That is because actual inflation depends, at least in part, on what consumers think it will be. It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs.
Fed Chair Jerome Powell has repeatedly stressed that policymakers are committed to wrangling inflation back to the Fed’s 2% target goal before they start to reduce interest rates.
Pedestrians near the Treasury building in Washington, D.C. on Dec. 30, 2022. (Photographer: Ting Shen/Bloomberg via Getty Images / Getty Images)
“We’re waiting to become more confident that inflation is moving sustainably at 2%,” Powell said while testifying on Capitol Hill last week. “When we do get that confidence, and we’re not far from it, it’ll be appropriate to begin to dial back the level of restriction.”
The New York Fed survey also pointed to growing concerns about the labor market and household finances.
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The mean perceived probability of losing one’s job in the next 12 months jumped by 2.7 percentage points to 14.5%. But mean unemployment expectations – or the probability that U.S. unemployment will be higher one year from now – fell by 1.1 percentage points to 36.1% in February, the lowest reading in two years.
At the same time, households were more downbeat about their ability to access credit. Perceptions of credit access compared with the same time last year deteriorated, with the share of households reporting it is harder to obtain credit rising.
“Perceptions and expectations about credit access turned less optimistic,” the report said.
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As we look ahead to 2024, many homeowners and prospective buyers are wondering what to expect when it comes to mortgage rates. The landscape of the housing market is constantly changing, so it’s important to stay informed about trends and predictions. In this blog post, we will discuss some factors that could impact mortgage rates in 2024 and what homeowners and buyers can expect.
One factor that could impact mortgage rates in 2024 is the overall state of the economy. If the economy is strong and growing, we may see higher mortgage rates as the Federal Reserve looks to combat inflation. On the other hand, if the economy is stagnant or in a recession, we may see lower mortgage rates as the Fed looks to stimulate growth. It’s important to keep an eye on economic indicators such as GDP growth, unemployment rates, and inflation to get a sense of where mortgage rates may be heading.
Another factor that could impact mortgage rates in 2024 is Federal Reserve policy. The Fed plays a key role in setting interest rates, and their decisions can have a ripple effect on mortgage rates. If the Fed decides to raise interest rates in response to inflation, we may see an increase in mortgage rates. Conversely, if the Fed decides to lower interest rates to stimulate growth, we may see a decrease in mortgage rates. Keeping up with the latest news and announcements from the Fed can give homeowners and buyers a sense of where mortgage rates may be heading.
In terms of specific cities and local mortgage companies, it’s important to note that mortgage rates can vary depending on location and lender. For example, in a city like New York City, where real estate prices are high, mortgage rates may be higher compared to a city like Indianapolis, where real estate prices are lower. Additionally, local mortgage companies may offer competitive rates and terms compared to national lenders. For example, in New York City, local lenders like Quontic Bank and CrossCountry Mortgage may offer specialized products and services tailored to the needs of local buyers.
It’s important for homeowners and buyers to shop around and compare rates from multiple lenders to ensure they are getting the best deal. Websites like Bankrate and LendingTree can be helpful resources for comparing rates and terms from multiple lenders. Homeowners and buyers should also consider working with a mortgage broker who can help them navigate the lending process and find the best mortgage product for their needs.
In conclusion, predicting mortgage rates in 2024 is not an exact science, but there are several factors that could impact rates. By staying informed about economic indicators, Federal Reserve policy, and local market trends, homeowners and buyers can make informed decisions about their mortgage. Shopping around and comparing rates from multiple lenders is key to ensuring you are getting the best deal on your mortgage. Whether you’re looking to refinance your existing mortgage or buy a new home, it’s important to stay informed and be proactive in managing your mortgage.
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