The December Consumer Expectations Survey shows that both short and medium-term inflation expectations remain unchanged. One-year and three-year median inflation expectations remained unchanged in December, at 6% and 4%, respectively. Housing price expectations, on the other hand, rose in December but remained below the May 2021 peak. Median home price expectations rose to 5.5% from 5% in November.
Expectations for price changes ahead of the year are 3.5 percentage points (5.7%) for gas prices, 1.4 percentage points (to 7.8%) for food prices, and 1 percentage points (to 7.8%) for the cost of university education. The median expected change in medical care and rental prices remained unchanged at 9.6% and 10%, respectively.
Monthly Survey of Consumer Expectations… Source: New York Fed, Bloomberg
Although inflation expectations have stabilized, we see that their high levels are still among the main expectations and concerns. The continuation of the problematic inflation waves has caused the old view of the Fed on inflation to become obsolete, and is currently underpinning the limitation of monetary support. On the other hand, household incomes are increasing with the recovery in employment; however, wage increases, which are still below inflation, cause real incomes to decrease. For this reason, the high increase pressure in the labor market will also apply, which is important for consumers' spending abilities. So once again, we are watching the demand factor added to the cost.
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