A report released by the New York Fed on Tuesday, July 8, revealed that earlier this year, concerns about President Trump’s tariffs causing a sharp rise in inflation have now completely dissipated. The survey also indicated an improvement in consumers’ expectations regarding their household financial situation, with inflation predicted to remain stable.
According to the New York Fed’s June consumer expectation survey, the one-year inflation expectation stands at 3%, the same level as before President Trump took office in January. Furthermore, the data for June, showing a decrease to 3% from May’s 3.2%, was notably lower than the peak of 3.6% seen in March and April. The three-year and five-year inflation expectations of consumers remained unchanged at 3% and 2.6%, respectively.
The long-term inflation outlook has essentially remained stable, which is good news for Federal Reserve officials. This development indicates that people believe inflation will not become a major concern in the long run.
So far, President Trump’s tariffs have not been reflected in most inflation data. Data from the U.S. Bureau of Labor Statistics shows that the Consumer Price Index rose by only 0.1% in May compared to April, and increased by 2.4% from the same period last year. The Federal Reserve’s target is to maintain the annual inflation rate at 2%.
The June survey by the New York Fed also revealed that with the prospect of overall price increases stabilizing, Americans have become more optimistic about their household financial situation for the coming year. The percentage of households expecting an improvement in financial conditions one year from now has increased, with a smaller proportion expecting a decline.
The survey also found that consumers’ expectations regarding job prospects have improved. The average perceived probability of being unemployed in the next 12 months decreased by 0.8 percentage points to 14.0%, the lowest level since December 2024.
More Americans now believe that obtaining credit has become easier. The survey report indicated a decrease in the proportion of households claiming it’s harder to obtain credit compared to a year ago. In the June survey, people’s expectations regarding the availability of credit in the future improved, with a lower percentage of respondents anticipating it will be more difficult to obtain credit in the next year.
Despite a softening outlook for overall inflation, survey participants still anticipate price increases in several key categories. Specifically, gasoline prices are expected to rise by 4.2% in the next year, healthcare prices by 9.3%, college education and rental prices by 9.1%. The projected increase in food prices remains unchanged at 5.5%.