Inflation Expectations Stay Anchored, but Consumer Financial Confidence Weakens — Evening Brief – 12.08.25 

U.S. consumers continue to expect inflation to moderate gradually, but their confidence in their own financial outlook is slipping, according to the New York Federal Reserve’s latest Survey of Consumer Expectations. 

Median inflation expectations for one year ahead held at 3.2% in November, unchanged from October. Expectations at three-year and five-year horizons also remained steady at 3.0%, suggesting that households broadly anticipate price pressures continuing to ease toward the Federal Reserve’s target over time. 

Despite that stability, consumers reported growing financial strain. Thirty-nine percent of respondents said they are worse off than a year ago — up sharply from 34.4% — while only 17.6% said they are better off, down from 22.5% in October. Looking ahead, fewer households expect their finances to improve over the next 12 months. 

Concerns around debt and borrowing are also rising. The average perceived probability of missing a minimum debt payment in the next three months increased to 13.7%, slightly above the 12-month average. Respondents further expect credit to become harder to obtain, signaling a more cautious stance toward household balance sheets. 

Inflation expectations within individual spending categories showed mixed shifts. Home price growth expectations held at 3.0% for a sixth straight month, but consumers now anticipate medical care costs to rise 10.1%, the highest rate since early 2014. 

Income dynamics remain challenging: households expect spending to grow 5.0% over the next year — well above the expected 2.9% increase in income — reinforcing consumer concerns about affordability. 

One bright spot remains job security. The perceived probability of losing a job fell to 13.8%, the lowest since late 2024, and confidence in finding new employment improved modestly. Still, hiring optimism remains below its 12-month average, reflecting caution in an evolving labor market.