In the January 2026 survey by the Federal Reserve Bank of New York, households reported that they expect smaller price increases over the next year compared with last month. The median short-term inflation expectation—the rate consumers think prices will rise over the next 12 months—fell to 3.1%, down from 3.4% in December. Expectations for inflation over the next three and five years stayed steady at 3.0%. This shift suggests that consumers are becoming slightly more confident that inflation will cool in the near future, even if prices overall have been elevated in recent years.
The survey also showed that people feel a bit better about the job market, with more households expecting wage growth and a lower chance of job loss in the coming year. However, expectations about household income growth were slightly lower, and many respondents reported concerns about future financial conditions and access to credit. Overall, while inflation worries eased in the short term, households still hold mixed views about their personal economic situation.
I think this shows how consumer sentiment can be mixed even when some indicators improve. It’s a good sign that short-term inflation expectations are falling because that can help stabilize spending and overall economic confidence. At the same time, it makes sense that people are still worried about their personal finances, since slower expected income growth and credit concerns can limit how optimistic households actually feel.
ReplyDeleteThe difference between better inflation expectations and ongoing worries about income and credit access is important here. Even if people think prices will rise more slowly, they may not feel confident about their finances if wages and job security are still uncertain. This shows the gap between big picture economic numbers and what households actually feel day to day.
ReplyDeleteI think as 2026 unfolds and the Trump administration continues to operate, it'll allow everyone to become more confident in their economic expectations as opposed to before, where the uncertainty and volatility had everyone unsure what to do
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