NY Fed survey finds deteriorating views on household financial situation
In its latest Survey of Consumer Expectations, the bank found that last month, as President Donald Trump initiated a dramatic trade war against the rest of the world, households' perceptions of their current and future financial situations 'deteriorated sharply.' Survey respondents also projected slower gains in income and earnings in April relative to March, and for unemployment to rise and for it to be harder to find a job. Spending expectations, however, rose in April versus March.
On the inflation front, it was a mixed bag. Survey respondents projected year-ahead inflation at 3.6%, unchanged from March, while the three-year-ahead expectation rose to the highest level since July 2022 at 3.2%, from March's 3%. Five years from now, survey respondents see inflation at 2.7% versus March's 2.9%.
The report found the public expecting accelerating price pressures for rent, gasoline and college costs, as well as a projected year-ahead rise in home prices of 3.3%, from March's 3%.
The release of the New York Fed report comes after the Fed decided on Wednesday to hold its short-term interest rate target steady amid a time of high uncertainty and rising economic risks.
While the Fed views the current state of the economy as solid, the trade tariff regime now being pursued by the Trump administration has unsettled the outlook, with many economists expecting it to lead to higher inflation and unemployment, while slowing growth from where it otherwise would have been.
"Despite heightened uncertainty, the economy is still in a solid position,' Fed Chair Jerome Powell said in a press conference following the Fed policy gathering.
But he also acknowledged that while the economy is 'healthy,' it is one that's 'shrouded in some very downbeat sentiment on the part of people and businesses.' Powell also offered a note of caution on data detailing consumer mood, saying 'the link between sentiment data and consumer spending has been weak.'
The state of inflation expectations data has loomed large in Fed calculations because officials broadly agree that where the public projects price pressures to go has a strong impact on where they are now. New York Fed data has not shown the same rise in inflation expectations evidenced by other surveys like those from the University of Michigan.
Over recent weeks numerous Fed officials have said it's critical to keep expectations stable amid the current period of uncertainty and inflation risks driven by Trump's policy agenda.
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