Inflation Expectations Tick Higher as Credit Conditions Tighten — Evening Brief – 05.07.26

U.S. consumers are growing more cautious on inflation and credit conditions, even as labor market expectations remain relatively stable, according to the latest survey from the Federal Reserve Bank of New York.

The April 2026 Survey of Consumer Expectations showed that one-year-ahead inflation expectations rose to 3.6%, up 0.2 percentage point from March, while longer-term views remained anchored at 3.1% over three years and 3.0% over five years. The data suggests households are increasingly concerned about near-term price pressures, even as longer-term inflation credibility holds.

Price expectations were mixed across categories. Gas price expectations dropped sharply by 4.3 percentage points to 5.1% after a March spike, while expectations for food, rent and education costs edged lower. At the same time, disagreement and uncertainty around inflation increased at the short-term horizon, signaling less consensus among households.

Labor market sentiment showed modest deterioration. The perceived probability that unemployment will rise over the next year climbed to 43.9%, the highest level since April 2025, while the probability of job loss edged up to 14.6%. However, earnings growth expectations ticked higher to 2.7%, suggesting some resilience in wage outlooks.

Household finances presented a mixed picture. Spending expectations rose to 5.4%, the highest level since mid-2023, while income growth expectations eased slightly. Access to credit deteriorated, with more respondents reporting it is harder to obtain financing now and in the future.

Despite tighter credit conditions, delinquency expectations improved, with the probability of missing a debt payment falling to 11.4%, a two-year low, highlighting continued balance sheet stability even as financial sentiment weakens.