The New York Federal Reserve’s latest Survey of Consumer Expectations shows Americans are growing increasingly anxious about rising prices heading into late 2026.
The median one-year inflation outlook jumped to 3.9% in September, up 0.3 percentage point from August and the highest reading since May 2023, when it stood at 4.1%.
Household spending growth expectations also climbed to 5.5%, rising 0.3 percentage point month over month and matching the same May 2023 peak seen in the inflation figures.
The results arrive as Fed officials continue to wrestle with the appropriate setting for monetary policy while inflation remains well above the central bank’s 2% target.
Markets largely expect the Federal Open Market Committee to hold benchmark interest rates steady when it convenes later in October for its next scheduled decision.
New York Fed President John Williams is among several key officials who have recently signaled that policymakers can afford to take their time when evaluating where interest rates should be set.
Longer-term inflation expectations appear more stable, with the three-year outlook rising just 0.1 percentage point to 3.3% while the five-year view held unchanged at 3%.
Bond market signals are less reassuring, however, with the closely watched five-year breakeven inflation indicator hovering near its highest level of the year at 2.35%.
Treasury yields have soared in recent weeks, reaching levels not seen since the early part of the century, adding to broader concerns about the inflation trajectory.
Surging energy costs sit at the core of the inflation problem, with gasoline prices rising nearly 4% in August alone, according to the Bureau of Labor Statistics, and fuel oil surging more than 10%.
At the consumer level, utilities have filed for $23.1 billion in rate increases so far in 2026, according to PowerLines, a nonpartisan consumer advocacy group, with the third quarter alone seeing requests for $4.5 billion, the largest sum for that period on record.
The New York Fed survey found consumers expect gas prices to rise by 4.8% over the next year, an increase of 0.2 percentage point from August’s reading.
Fed officials have long considered inflation expectations a key driver of actual inflation, making the survey results a closely monitored input for policymakers.
Despite expecting the Fed to stand pat in October, markets are pricing in a far more aggressive central bank over the longer term, with Fed funds futures contracts implying a rate of 5.58% in five years.
The current federal funds rate is targeted in a range between 3.75% and 4%, leaving considerable room for movement if inflation pressures continue to build.
