Americans' inflation fears held steady for the first time in months in December, although concerns over rising prices remained at a record high, according to a key Federal Reserve Bank of New York survey published Monday.
The median expectation is that the inflation rate will be up 6% one year from now, the highest level for the gauge since its launch in June 2013, according to the New York Federal Reserve's Survey of Consumer Expectations. Inflation expectations over the next three years also remained unchanged at 4%.
The survey plays a critical role in determining how Fed policymakers respond to the recent inflation spike. That's because actual inflation depends – at least in part – on what consumers think it will be. It's a sort of self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs.
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