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The central bank Survey of Consumer Expectations for April showed that the outlook for spending fell by half a percentage point to an annual rate of 5.2%, the lowest level since September 2021.
That came with a corresponding decline of 0.3 percentage point in the overall outlook for inflation over the next year. Respondents expect an inflation rate of about 4.4% in the next 12 months, still well above the three-year outlook for 2.9% and the five-year view of 2.6%.
All of those levels are still above the Fed’s 2% inflation target, though they are drifting closer to the goal.
The survey’s results come less than a week after the Fed approved its 10th consecutive interest rate hike since March 2022. That took the benchmark fed funds rate to a target range of 5%-5.25%, the highest level since August 2007.
Along with the rate hike, Fed officials hinted that this month’s increase could be the last for a while as they assess the impact of all the preceding monetary policy tightening.
Consumers expect to see gas prices climb by 5.1% over the next year, a half-point increase from the March survey. Food prices are projected to rise by 5.8%, a 0.1 percentage point decline from the previous month. The outlook for college costs dropped sharply, falling to an expected increase of 7.8% that was 1.1 percentage points lower than March.
The median outlook for earnings growth was unchanged at 3%, though the employment outlook worsened. The likelihood that the unemployment rate will be higher a year from now increased to 41.8%, a 1.1 percentage point increase. The jobless rate for April fell on Friday to 3.4%, tied for the lowest since May 1969.
Elsewhere in the survey, the one-year outlook for home price appreciation rose to 2.5%, the highest since July 2022 and a 0.7 percentage point increase from March.