US consumers expect to spend more on rent and other bills, NY Fed survey finds

US 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 US 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.