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

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The latest New York Fed consumer survey shows that U.S. inflation expectations jumped significantly in March, with a surge in oil price expectations to a four-year high as the main driver. Meanwhile, confidence in the labor market continued to deteriorate, and expectations for household financial conditions also weakened in tandem.

The New York Fed's March 2026 consumer expectations survey, released on Monday, shows that one-year inflation expectations rose from 3.0% in February to 3.4%, up 0.4 percentage points and matching the high in April 2025. Three-year inflation expectations edged up by 0.1 percentage point to 3.1%, while the five-year expectation held steady at 3.0%.

The spike in short-term inflation expectations this time was mainly driven by a surge in gasoline price expectations—respondents’ expectation for the increase in gasoline prices over the next year soared by 5.3 percentage points to 9.4%, reaching the highest level since March 2022.

This data was released just ahead of Friday’s CPI report, making the timing sensitive for the market. The rise in inflation expectations, alongside the continued deterioration in labor market confidence, further complicates the outlook for Fed policy—on one hand, inflationary pressures are reigniting; on the other, concerns about the job market are deepening, possibly fueling discussion of stagflation risks.

Oil price expectations surge, driving up inflation forecasts for multiple goods

The jump in gasoline price expectations in this survey was particularly notable, becoming the core factor pushing overall short-term inflation expectations higher. Respondents' expectations for the increase in gasoline prices over the next year leapt by 5.3 percentage points to 9.4%, the highest reading since March 2022.

Expectations for other major commodities and living costs also generally rose, but to a relatively modest degree. Food price expectations climbed 0.7 percentage points to 6.0%; rent price expectations rose 1.2 percentage points to 7.1%; medical costs remained steady at 9.7%; and college tuition expectations edged down 0.1 percentage point to 9.0%.

Meanwhile, uncertainty about future inflation also increased among respondents. The survey indicated that uncertainty indicators for all horizons rose, suggesting growing disagreement among consumers about future price trends.

Labor market confidence continues to deteriorate

Along with rising inflation expectations, respondents' pessimism about the labor market is also intensifying. The survey shows the average probability that respondents expect the U.S. unemployment rate to rise in the next year increased by 3.6 percentage points to 43.5%, the highest level since April 2025.

At the personal employment level, the perceived probability of losing one’s job in the next 12 months rose 0.6 percentage points to 14.4%, though this remains below the 12-month rolling average of 14.6%. Notably, voluntary quit intentions increased sharply by 2.4 percentage points to 18.3%.

On the other hand, respondents' confidence in finding a new job after unemployment improved, with the corresponding probability expectation rising by 1.9 percentage points to 45.9%. This improvement was seen across different age, education, and income groups, though it remains below the 12-month rolling average of 47.5%.

In terms of wage expectations, the median expected household income growth over the next year fell 0.1 percentage point to 2.4%, not only below 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 expectations weaken across the board

Consumers' assessment of their own financial situation is also simultaneously deteriorating. The survey shows the proportion of households reporting worsening financial conditions from a year ago increased, while those reporting improvement declined. Expectations for household finances over the next year are similarly pessimistic: The share expecting a deterioration rose to the highest level since April 2025.

Regarding 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 expected income growth remained unchanged at 2.9%. The average probability of being unable to meet the minimum debt payment over the next three months rose by 0.7 percentage points to 12.3%, with the stress being most evident among those age 60 and above, those with some college education, and those with incomes below $50,000.

As for credit access and asset expectations, respondents perceived current access to credit as somewhat improved, but expectations for future credit availability worsened slightly. The average probability respondents assigned to a rise in the U.S. stock market in the next 12 months fell by 1.6 percentage points to 36.3%. In addition, the median expectation for government debt growth over the next year rose 0.6 percentage points to 9.8%, well above the 12-month rolling average of 7.4%.

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