NY Fed Survey Shows Broad Decline in Inflation Expectations — Evening Brief – 06.09.25
For the first time since 2024, U.S. consumer inflation expectations fell across all time horizons in May, according to the Federal Reserve Bank of New York’s Survey of Consumer Expectations. The survey also revealed modest improvements in household financial sentiment and a softening of labor market pessimism.
Median one-year inflation expectations fell 0.4 percentage point to 3.2%, while three-year expectations declined 0.2 percentage point to 3.0%. Five-year expectations dipped 0.1 percentage point to 2.6%. Additionally, survey respondents expressed less uncertainty about inflation at the one-year horizon, though uncertainty remained steady at the three- and five-year horizons.
Household financial sentiment saw modest gains, with expected income growth rising 0.1 percentage point to 2.7%, still below the 12-month trailing average of 3.0%. Meanwhile, median household spending growth expectations edged down to 5.0% from 5.2%, though they remain above the 12-month trailing average of 4.9%.
In credit markets, fewer households reported difficulties in accessing credit, though expectations for future credit availability declined, with only 10.6% of respondents anticipating easier access a year from now, down from 12.1%.
The probability of missing a minimum debt payment in the next three months dropped to 13.4%, the lowest level since January 2025, largely driven by households with higher education levels and incomes exceeding $50K, according to the NY Fed.
Labor market concerns eased slightly, as mean unemployment expectations—the probability that the U.S. unemployment rate will be higher one year from now—slid 3.3 percentage points to 40.8%, though still above the 12-month average of 37.7%.
Meanwhile, the perceived probability of losing one’s job in the next year declined to 14.8% from 14.3%, while the probability of voluntarily leaving one’s job ticked up 0.1 percentage point to 18.3%. The likelihood of finding a job within three months if displaced rose by 1.5 percentage points to 50.7%, trailing the 12-month average of 52.2%.