NY Fed Survey Hints At Potential For Higher Core CPI Ahead

The NY Fed's latest consumer expectations survey showed 3-yr expectations rose to the highest since 2013, in July at 3.71% (from 3.55% in June). The one-year expectation ticked up to 4.84% from 4.80%.

• The 1-Yr reading further corroborates the UMichigan's survey gain to 4.7% (from 4.2%) last month, though the 5-10 Year outlook measured by UMich was - perhaps in an indication that longer-term expectations aren't becoming too unanchored - more subdued (5-10-Yr remaining below 3%).
• The latter is probably more important for Fed policy-setting: the Fed's index of common inflation expectations (CIE), which most of the Fed leadership has looked to for clues as to whether inflation expectations are becoming unanchored, specifically cites the Michigan long-term survey figures.
• But the next few months of the NY Fed survey will be interesting to watch, particularly if the medium-term (3-Yr) reading continues to rise.
• Note also that consumers saw rent rising 9.8% and medical care rising 9.5% in the next year. If those expectations comes to fruition, it would represent a massive upside risk to core inflation projections to end-2022 given how subdued those CPI categories have been, and would put paid to the Fed's "transitory" narrative.

Source: NY Fed, UMich, BBG, MNI