Economy · 7 Oct 2026 · 2 min read
NY Fed survey: Americans’ inflation expectations hit highest since 2023
US consumers now expect 3.9% inflation over the next year, the most since May 2023, and more say their finances are getting worse. That matters for a Fed weighing another hike.
The short answer
The New York Fed's September Survey of Consumer Expectations shows Americans expect 3.9% inflation over the next 12 months, up 0.3 point and the highest since May 2023. Longer-term views held steadier, at 3.3% for three years and 3% for five. Rising expectations could make the Fed more cautious about inflation becoming entrenched.
What’s going on here?
The Federal Reserve Bank of New York released its monthly Survey of Consumer Expectations on Wednesday. Median one-year inflation expectations rose 0.3 percentage point to 3.9% in September, the highest since May 2023. The three-year view edged up 0.1 point to 3.3%, while the five-year view stayed at 3%. Expected household spending growth rose to 5.5%, also a high since May 2023. More households said they were worse off than a year ago and expected to be worse off a year from now. The survey polls a rotating panel of about 1,300 households.
What does this mean?
Inflation expectations matter because they can feed on themselves. If households and businesses expect prices to keep rising, workers push for bigger raises and companies feel freer to lift prices. That is why the Fed watches surveys like this one closely. A jump in the one-year number to its highest in nearly three and a half years is an uncomfortable signal for a central bank that has already raised rates once this year.
Energy is the main driver. Bureau of Labor Statistics data show pump prices climbed close to 4% in a single month, August, and were more than 27% above their level a year before. AAA put the national average at $4.37 a gallon on Wednesday, against about $3.12 a year ago. Respondents in the survey expect gas prices to climb a further 4.8% over the next year. Household utility bills are also under pressure: the consumer group PowerLines counts $23.1 billion in requested utility rate increases so far in 2026.
There is a mixed picture inside the survey. Expected income growth rose to 3.1%, the highest since February 2025, and the perceived chance of losing one's job fell to its lowest since December 2024. So people feel reasonably secure about work but squeezed on prices. Longer-term expectations staying near 3% suggests the public still sees today's spike as partly temporary, which gives the Fed some breathing room.
The timing is notable. The same day, minutes from the Fed's September meeting showed most officials expect another rate hike by year end. Markets largely expect a hold at the October meeting, according to CNBC, but futures imply a fed funds rate of 5.58% in five years, well above today's 3.75% to 4% range.
The bull case
Medium- and long-term expectations are still fairly stable, which suggests the public has not given up on inflation easing. Job security looks solid and income expectations are rising, so consumer spending may hold up. If energy prices cool, the one-year number could fall back quickly, easing pressure on the Fed and on bond yields.
The bear case
Rising short-term expectations could make the Fed more willing to hike again, lifting borrowing costs further. Households already report feeling worse off, and higher fuel and utility bills hit lower-income families hardest. If more people dip into savings or use credit to keep spending, as some economists warn, consumer demand could weaken later.
Why should I care?
For markets:
Treasury yields and inflation-protected bonds respond to shifts in inflation expectations, while consumer-facing retailers could feel pressure if households cut back on discretionary spending.
The bigger picture:
For households, persistent price rises erode the value of cash and make budgeting harder. Keeping an eye on fuel and utility costs, and on what savings accounts actually pay after inflation, matters more when expectations climb.
Market impact
| Asset (ticker) | Potential direction | Timeframe | Confidence | Reason |
|---|---|---|---|---|
| 10-year Treasury yield | ↑ bullish | Short term | Medium | Higher inflation expectations raise the odds of another Fed hike and push up yields. |
| iShares TIPS Bond ETF (TIP) | ↑ bullish | Short term | Low | Inflation-protected bonds tend to draw interest when price expectations rise. |
| Consumer discretionary stocks (XLY ETF) | ↓ bearish | Long term | Low | Squeezed household budgets could reduce spending on non-essential goods. |
Potential impact, not investment advice.
Frequently asked questions
What are inflation expectations in the New York Fed survey?
They are the median inflation rate that surveyed households expect over a set period. In September, Americans expected 3.9% inflation over the next year, 3.3% over three years and 3% over five years, according to the New York Fed's Survey of Consumer Expectations.
Why are Americans expecting higher inflation?
Energy costs are the biggest factor. Gasoline prices rose nearly 4% in August and more than 27% from a year earlier, according to the Bureau of Labor Statistics, and utility companies have requested billions of dollars in rate increases this year.
Does higher inflation expectation mean the Fed will raise rates?
Not automatically, but it adds pressure. Fed officials see expectations as a key driver of inflation. Minutes released the same day showed most officials think another hike is likely by year end, though markets largely expect a hold in October.
Sources: Federal Reserve Bank of New York, CNBC, CNBC
