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

The latest consumer survey from the Federal Reserve Bank of New York shows that U.S. inflation expectations jumped sharply in March, with expectations for oil prices surging to a four-year high as the main driver. At the same time, consumer confidence in the labor market continued to deteriorate, and expectations for household finances also weakened in parallel.

In its March 2026 Consumer Expectations Survey released Monday, the one-year inflation expectation rose from 3.0% in February to 3.4%, up 0.4 percentage points, matching the high point in April 2025. The three-year inflation expectation edged up by 0.1 percentage points to 3.1%, while the five-year expectation remained unchanged at 3.0%.

The jump in short-term inflation expectations was driven mainly by a sharp increase in expectations for gasoline prices—respondents’ expectations for the year-ahead increase in gasoline prices surged by 5.3 percentage points to 9.4%, the highest level since March 2022.

The data were released right ahead of the CPI report on Friday, making it especially time-sensitive for markets. The upward movement in inflation expectations alongside the simultaneous deterioration in labor market confidence has made the outlook for Federal Reserve monetary policy even more complex—on the one hand, inflationary pressure is reigniting, while on the other hand, concerns in the jobs market are deepening, and discussions of stagflation risks may heat up.

Oil price expectations jump, lifting multiple commodity inflation expectations

In this survey, the jump in gasoline price expectations was particularly pronounced, becoming the core factor pulling overall near-term inflation expectations higher. Respondents’ expectations for the year-ahead increase in gasoline prices rose sharply by 5.3 percentage points from the prior level to 9.4%, the highest reading since March 2022.

Other large commodity categories and expectations for living costs also moved higher overall, but by comparatively moderate amounts. Food price expectations rose by 0.7 percentage points to 6.0%; rent price expectations rose by 1.2 percentage points to 7.1%; medical expense expectations held steady at 9.7%; and expectations for college education costs fell slightly by 0.1 percentage points to 9.0%.

Meanwhile, uncertainty about the inflation outlook among respondents is also increasing. The survey shows that inflation-uncertainty indicators across all time horizons rose, suggesting that differences in consumers’ views on the path of future prices are widening.

Labor market confidence continues to deteriorate

As inflation expectations rose, respondents’ pessimism about the labor market intensified as well. The survey shows that respondents’ average probability expectation for the U.S. unemployment rate rising over the next year increased by 3.6 percentage points to 43.5%, the highest level since April 2025.

On the individual employment front, respondents said the average probability of losing a job over the next 12 months rose by 0.6 percentage points to 14.4%, even though it remains below the 12-month rolling average of 14.6%. Of note is that the intention to voluntarily leave employment (expected quit rate) surged by 2.4 percentage points to 18.3%.

On the other hand, respondents’ confidence in finding a job again after becoming unemployed rebounded: the probability expectation rose by 1.9 percentage points to 45.9%, and this improvement is reflected across different age groups, education levels, and income groups. However, this reading is still below the 12-month rolling average of 47.5%.

For wage expectations, the median expectation for income growth over the next year fell by 0.1 percentage points to 2.4%, not only below the 12-month rolling average of 2.6%, but also at the low end of the 2.4% to 3.0% range since May 2021.

Household financial conditions expectations weaken across the board

Consumers’ assessment of their own financial conditions also deteriorated in step. The survey shows that, compared with a year ago, the proportion of households reporting worse financial conditions increased, while the proportion reporting improvement decreased; expectations for financial conditions over the coming year were also pessimistic, with the share of households expecting their financial conditions to worsen rising to the highest level since April 2025.

On spending and debt, respondents’ median expectation for household spending growth over the next year rose slightly by 0.2 percentage points to 5.1%, while expectations for household income growth remained unchanged at 2.9%. The average probability of being unable to repay at least the minimum debt within the next three months rose by 0.7 percentage points to 12.3%; this pressure was most evident among people aged 60 and above, those with some college education, and those with annual income below $50k.

On credit and asset expectations, respondents’ perception of the difficulty of obtaining credit today improved, but expectations for the availability of credit in the future worsened slightly. Respondents’ average probability of the U.S. stock market rising over the next 12 months fell by 1.6 percentage points to 36.3%. In addition, the median expectation for growth in government debt over the next year rose by 0.6 percentage points to 9.8%, far above the 12-month rolling average of 7.4%.

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