US inflation expectations stabilise, but debt concerns pick up

CONSUMERS’ expectations of US inflation over the coming year stabilised in March, but Americans are growing increasingly concerned about their ability to pay back their debt.

Median year-ahead inflation expectations held at 3 per cent in March, a Federal Reserve Bank of New York survey showed on Monday (Apr 8). Three-year expectations climbed to 2.9 per cent, while five-year views declined to 2.6 per cent.

At the same time, high rates paired with years of elevated inflation are weighing on households. The perceived probability of missing a minimum debt payment over the next three months rose to 12.9 per cent in March – the most since the onset of the pandemic.

The pickup in concern was most pronounced among respondents age 40 to 60, who tend to have higher debt and slower income growth than younger consumers.

Expected price growth over the coming year for gas, food, medical care, college education and rent all climbed in March.

While inflation views remained relatively stable last month, respondents are still unsure about future price changes. Uncertainty among those age 40 to 60 about the pace of inflation three years from now rose in March to the highest level in survey data back to 2013.

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The rotating panel is made up of about 1,300 consumers. Respondents participate in the panel for up to 12 months, allowing Fed researchers to observe changes in expectations and behaviour of the same individuals over time. BLOOMBERG