Inflation Fears Surge Again: Americans’ One-Year Outlook Hits Highest Level in More Than Three Years
Inflation concerns among U.S. consumers intensified in September, with Americans expecting prices to rise at the fastest pace in more than three years as higher energy costs and household expenses put renewed pressure on the Federal Reserve.
Median inflation expectations for the next 12 months jumped to 3.9%, up from 3.6% in August, according to the Federal Reserve Bank of New York’s September Survey of Consumer Expectations. It was the highest one-year reading since May 2023, when they stood at 4.1%.
The increase comes as the Federal Reserve weighs how long to keep interest rates elevated while inflation remains above its 2% target. Markets largely expect policymakers to leave the federal funds rate unchanged at their meeting later this month, following recent inflation data that came in softer than expected.
Consumers are also bracing for a sharp increase in their own spending. The New York Fed survey found median expectations for household spending growth over the next year rose 0.3 percentage points to 5.5%, the highest level since May 2023 and above the 12-month trailing average of 5%. The increase was broad-based across age and education groups.
Fed officials closely watch inflation expectations because they can influence consumer and business behavior. If households believe prices will keep rising rapidly, they may accelerate purchases or demand higher wages, while businesses may become more willing to raise prices.
For now, the New York Fed survey suggests consumers remain less worried about inflation several years into the future. Three-year inflation expectations increased only slightly, from 3.2% to 3.3%, while expectations five years ahead remained unchanged at 3%.
The shorter-term increase appears to be closely tied to the prices Americans encounter regularly. Consumers now expect gasoline prices to climb 4.8% over the next year, up from 4.6% in August.
Expectations for food price increases rose to 5.5%, while anticipated medical care inflation climbed to 9.2%. Expected rent increases reached 6.8%, and consumers projected the cost of a college education would rise 7.5%.
Energy costs have already been feeding into inflation. Gasoline prices rose nearly 4% in August, while fuel oil prices jumped more than 10%, according to Bureau of Labor Statistics data.
Utilities are adding another strain on household budgets. Utilities have sought $23.1 billion in rate increases so far in 2026, according to consumer advocacy group PowerLines, including $4.5 billion during the third quarter, the largest amount requested for that period on record.
Households are feeling the squeeze even as parts of the labor outlook improved. The probability consumers assigned to losing their jobs during the next year fell to 13.5%, its lowest level since December 2024, while the perceived chance of finding another job after losing one increased to 46.1%. Expectations that unemployment will be higher a year from now also declined.
But Americans became more pessimistic about their personal finances. The New York Fed said larger shares of respondents reported being financially worse off than a year earlier and expected their financial situation to deteriorate further over the coming year.
