(Reuters) – U.S. consumers said they expect to spend substantially more on rent, gas and other essentials over the next year, a sign some people are expecting key costs to rise as the economy continues to heal from the crisis caused by the coronavirus pandemic, according to a survey released Monday by the Federal Reserve Bank of New York.
Consumers said they expect gas prices to rise by a median 9.6% over the next year, up from 6.2% in January. It was the fifth straight month of increase and a new high for the survey, which launched in 2013. Similarly, rent is expected to increase by a median of 9.0% over the next year, up from 6.4% in January.
Respondents also raised their expectations for how much food, medical care and college will cost over the next year.
A drop in coronavirus infections, the distribution of vaccines and expectations for additional fiscal support is raising hopes that the U.S. economy could be poised for a robust recovery this year. Investors expecting stronger inflation are moving into riskier assets, leading to a rise in long-term Treasury yields.
Some investors worried about inflation have speculated the Fed would move to lower long-term borrowing costs by adjusting its bond-buying program. But Fed officials signaled last week that they view the rise in long-term yields as a sign of growing optimism about the economy and do not expect to adjust monetary support in the near future. Fed officials will meet again for a policy-setting meeting on March 16 and 17.
The New York Fed’s survey is based on a rotating panel of about 1,300 households.
Median inflation expectations over the next year rose slightly to 3.1% in February, reaching the highest level since July 2014. Projections for inflation at the three-year horizon stayed flat at 3.0%, according to the monthly Survey of Consumer Expectations.
(Reporting by Jonnelle Marte; Editing by Andrea Ricci)