The latest US March inflation data presents a complex picture for markets, blending signs of rising short-term inflation expectations with long-term stability. According to the New York Fed’s March consumer expectations survey, one-year inflation expectations increased to 3.58%, marking an 18-month high. This uptick points to renewed concerns over near-term price pressures.
However, the outlook over the longer term remains more stable. Three- and five-year inflation expectations held steady or slightly declined, indicating that consumers still believe inflation will return to more normal levels in the future. While this offers some reassurance, the data also underscores the fragile state of the economic recovery. Varying inflation forecasts across different surveys further highlight the uncertainty and lack of consensus regarding future inflation risks.
Mounting Labor Market Pressures and Household Concerns
In addition to inflation, the survey revealed growing anxiety around employment and personal finances. The expected probability of a higher unemployment rate in the next 12 months rose sharply to 44%, the highest level since the height of the pandemic.
Median income growth expectations fell to 2.8%, their lowest point in nearly three years. Notably, low-income and less-educated households expressed the most concern, signaling that financial stress is not evenly distributed.
Consumer sentiment weakened further with declines in expected household spending, financial stability, and access to credit—potential headwinds for future economic activity.
