The New York Fed: Inflation expectations are rising sharply, driven by oil prices.

The latest consumer survey by the New York Fed shows that inflation expectations in the United States rose significantly in March, with expectations of oil prices surging to a four-year high being the main driver. Meanwhile, confidence in the labor market continued to deteriorate, and expectations of household financial conditions also weakened simultaneously.

The New York Fed's March 2026 Survey of Consumer Expectations, released on Monday, showed that one-year inflation expectations rose 0.4 percentage points to 3.4% from 3.0% in February, matching the high point in April 2025. Three-year inflation expectations edged up 0.1 percentage point to 3.1%, while five-year expectations remained unchanged at 3.0%.

The recent sharp rise in short-term inflation expectations was mainly driven by a significant increase in the expected price of gasoline - respondents' expectations for the increase in gasoline prices over the next year soared by 5.3 percentage points to 9.4%, the highest level since March 2022.

The release of the above data came just before the Friday CPI report, which was a sensitive timing for the market. The simultaneous rise in inflation expectations and the deterioration of labor market confidence have made the outlook for the Federal Reserve's monetary policy more complex - on the one hand, inflationary pressures are reigniting, while on the other hand, concerns about the job market are deepening. Discussions on the risk of stagflation may heat up.

The expected surge in oil prices has driven up inflation expectations for a number of commodities.

In this survey, the jump in the expected gasoline price was particularly prominent, becoming the core factor driving the overall short-term inflation expectations upward. The respondents' forecast for the increase in gasoline prices over the next year rose sharply by 5.3 percentage points from the previous level to 9.4%, the highest reading since March 2022.

Price expectations for other major commodities and living costs have also generally risen, but the increase has been relatively moderate. The expected increase in food prices has risen by 0.7 percentage points to 6.0%; the expected increase in rental prices has risen by 1.2 percentage points to 7.1%; the expected increase in medical expenses remains unchanged at 9.7%; and the expected increase in university education costs has slightly decreased by 0.1 percentage points to 9.0%.

At the same time, the uncertainty of respondents regarding the inflation outlook is also on the rise. The survey shows that the indicators of inflation uncertainty for all terms have increased, indicating that the divergence in consumers' judgments on future price trends is expanding.

Confidence in the labor market continues to deteriorate.

While inflation expectations are rising, respondents' pessimism about the labor market is also intensifying. The survey shows that the average probability expected by respondents that the US unemployment rate will rise in the coming year has increased by 3.6 percentage points to 43.5%, the highest level since April 2025.

At the individual employment level, respondents believe that the average probability of losing their jobs within the next 12 months has risen by 0.6 percentage points to 14.4%, although it remains below the 12-month rolling average of 14.6%. Notably, the willingness to leave voluntarily (expected resignation rate) has risen significantly by 2.4 percentage points to 18.3%.

On the other hand, respondents' confidence in finding a new job after unemployment has rebounded, with the probability expectation rising by 1.9 percentage points to 45.9%. This improvement was observed across different age groups, educational levels, and income brackets, but the reading still remains below the 12-month rolling average of 47.5%.

In terms of salary expectations, the median expected growth in income for the next year among respondents dropped by 0.1 percentage point to 2.4%, not only lower than the 12-month rolling average of 2.6%, but also at the lower end of the range (2.4% to 3.0%) since May 2021.

Household financial conditions are expected to weaken across the board.

Consumers' assessment of their own financial situation is also deteriorating simultaneously. Surveys show that compared with a year ago, the proportion of households reporting a decline in their financial situation has risen, while the proportion reporting an improvement has dropped; expectations for their financial situation in the coming year are equally pessimistic, with the proportion of households expecting a deterioration reaching the highest level since April 2025.

In terms of spending and debt, the median expectation for household spending growth over the next year rose slightly by 0.2 percentage points to 5.1%, while the expectation for household income growth remained unchanged at 2.9%. The average probability of being unable to repay the minimum debt within the next three months increased by 0.7 percentage points to 12.3%, with this pressure being most pronounced among those aged over 60, those with some college education, and those with an annual income of less than $50,000.

In terms of credit and asset expectations, respondents' perception of the current difficulty in obtaining credit has improved, but their expectations for future credit availability have slightly deteriorated. The average probability that respondents believe the US stock market will rise in the next 12 months has dropped by 1.6 percentage points to 36.3%. Additionally, the median expectation for government debt growth in the coming year has risen by 0.6 percentage points to 9.8%, which is much higher than the 12-month rolling average of 7.4%.

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