NY Fed’s Survey Shows Inflation Expectations Rose Marginally, Households Expressed Pessimism About Year-Ahead Financial Situations

According to the New York Fed's February 2025 Survey Of Consumer Expectations, household expectations of inflation increased slightly at the short-term horizon, while unemployment, delinquency, and credit access expectations deteriorated notably.

The survey showed that median inflation expectations increased by 0.1 percentage point at the one-year horizon, to 3.1%, compared to the 3% reading in January this year. Expectations were unchanged at the three-year and five-year horizons, both at 3%, in February.

At the same time, mean unemployment expectations – or the mean probability that the U.S. unemployment rate will be higher one year from now – jumped 5.4 percentage points to 39.4%, its highest reading since September 2023.

In his most recent speech, Federal Reserve Chair Jerome Powell noted that although there have been recent developments in some areas, especially trade policy, uncertainty around the changes and their likely effects remains high.

“As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves. We do not need to be in a hurry and are well-positioned to wait for greater clarity,” he said.

The survey also noted that households expressed more pessimism about their year-ahead financial situations in February.

It highlighted that expectations for future credit availability deteriorated considerably during the month. The share of respondents expecting it will be harder to obtain credit a year from now increased to 46.7% from 35.6%. This reading is the highest since June 2024.

The results come as investors become cautious about the macroeconomic outlook, given the Trump administration’s ongoing tariff threats and fears of a looming recession.

The survey also highlighted that the average perceived probability of missing a minimum debt payment over the next three months rose by 1.3 percentage points to 14.6%, the highest level since April 2020.

Meanwhile, the share of households expecting a worse financial situation one year from now rose to 27.4%, the highest level since November 2023.

Benchmark U.S. indices declined on Monday as fears of a recession in the world’s largest economy gathered pace after President Donald Trump did not explicitly rule out a full-blown recession this year in his interview with Fox News.

"I hate to predict things like that," he said, talking about recession. "There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing… It takes a little time, but I think it should be great for us."

The SPDR S&P 500 ETF Trust (SPY) fell over 2% by Monday afternoon, while the Invesco QQQ Trust, Series 1 (QQQ) declined over 3%.

Investors now await Wednesday's release of the CPI inflation data to get further indications about the Fed’s stance on rate cuts.

Also See: Blade Air Mobility Draws Investor Attention On Partnership With Skyports Infrastructure: Retail’s Unswayed

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