US inflation expectations stabilise but delinquency concerns grow

CONSUMER inflation expectations have stabilised both at the short- and longer-term horizons in recent months, but Americans continue to grow more concerned about their ability to keep up with debt payments.

Median one- and five-year inflation expectations were unchanged last month at 3 per cent and 2.8 per cent, respectively, according to a Federal Reserve Bank of New York survey released on Monday (Sep 9). Delinquency expectations, however, rose for a third straight month to the highest level since April 2020.

Inflation has eased substantially since reaching a four-decade high in 2022, but still-elevated price levels remain a strain on Americans’ finances. A slowdown in hiring and declining job opportunities are likely also shaping how people feel about the economy.

But the survey shows a growing amount of uncertainty in consumers’ inflation expectations. A measure of disagreement across respondents – the difference between the 25th and 75th per centile – increased at all time horizons, according to the report.

Looking ahead five years, a quarter of consumers expect inflation to drop to zero or lower while another subset of respondents think inflation will double to 6 per cent or higher. And at the one-year horizon, the 25th and 75th per centile spread has widened to the most in 15 months. BLOOMBERG