Inflation is the highest it’s been in 13 years — and Americans don’t think that it’s coming down any time soon.
In the next year, Americans expect inflation to hover around 4.8%, according to the June New York Fed Survey of Consumer Expectations published Monday. That’s up 0.8% points from May, an all-time high for the monthly Fed report.
The rise in inflation is being driven in part by the global microchip shortage, which is propping up the prices of new and used cars, as well as a shift in shopping habits as Americans take vacations, go to sporting events and eat out.
That explains why rental cars, airfare and uncooked beef roasts cost 12.1%, 7% and 6.4% more in May compared to April, according to data from the Consumer Price Index.
Top economists within and outside of the Biden administration, including Federal Reserve Chairman Jerome Powell, argue that the overall increase in prices Americans are confronting is temporary. They argue that inflation will clamp down as more Americans return to their pre-pandemic lifestyles.
“What we’re seeing now, we believe, is inflation in particular categories of goods and services that are being directly affected by this unique historical event that none of us have ever lived through before,” Powell said during Congressional testimony last month.
In the next year, Americans expect inflation to hover around 4.8%, according to a survey published by the New York Fed
Americans, for the most part, seem to agree with Powell that inflation will come down, but they don’t think it will happen as quickly as Powell has suggested.
Over the next three years, Americans expect to see inflation at 3.6%, according to the May and June Fed surveys. At the start of the year, Americans expected inflation over the next three years to hover around 3%.
This comes as Americans expect food prices to be 7.1% higher in the next year, down from an anticipated 8% increase in May. They expect gas to be 9.2% more expensive in the coming year, down from the 9.8% prediction in May, according to the survey of more than 1,300 U.S. household heads.
Average gas prices hover around $3.15 a gallon, nearly $1 more per gallon than the same time last year, according to data from AAA.
Americans expect food and gasoline prices to fall by 0.9% and 0.7% points in the coming year compared to what they predicted in May
On the other hand, Americans expect college education costs to rise by 7% in the upcoming year, the highest reading since 2019.
The survey also revealed that Americans are particularly optimistic about current labor market conditions.
Americans believe that there’s a 10.9% chance they’ll lose their job in the next year, the lowest rate since the survey started in 2014, and a 10% point improvement from last April when Americans reported a 20.9% chance they’d lose their job within a year.
A fresh batch of inflation data for June is set to be released on Tuesday. Economists are predicting a 0.5% rise in the CPI from May.