Falling gas prices are raising hopes that inflation is slowing, New York Fed survey shows

People shop at a supermarket in Montebello, California, on August 23, 2022.

Frederic J. Brown | AFP | Getty Images

Lower gas prices are raising optimism that inflation is on the decline, according to a survey Monday from the New York Federal Reserve.

Respondents to the central bank’s August Survey of Consumer Expectations indicated they expect the annual inflation rate to be 5.7% a year from now. That’s a decline from 6.2% in July and the lowest level since October 2021.

Three-year inflation expectations dropped to 2.8% in August from 3.2% the previous month. That was tied for the lowest level for that measure since November 2020.

The lowered outlook came amid a tumble in gasoline prices from more than $5 a gallon earlier in the summer, a nominal record high. The current national average is about $3.71 a gallon, still well above the price from a year ago but about a 26-cent decline from the same point in August, according to AAA.

Along those lines, consumers now expect gas prices to be little changed a year from now, according to the Fed survey. Food prices are expected to continue to climb, but the 5.8% anticipated increase a year from now is 0.8 percentage point lower than it was in July.

Rents are projected to increase 9.6%, but that is a 0.3 percentage point drop from the July survey.

Those numbers come as the Fed is using a series of aggressive interest rate increases to battle inflation that is still running close to a more than 40-year high. The central bank is widely expected to approve a third consecutive 0.75 percentage point increase when it meets again next week.

Rising cost of living

Source: https://www.cnbc.com/2022/09/12/falling-gas-prices-are-raising-hopes-that-inflation-is-slowing-new-york-fed-survey-shows.html