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Inflation Expected To Surge For At Least Another Year, A Key Economic Indicator Shows

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Inflation grew throughout October, increasing for the twelfth consecutive month in a row, according to a key economic indicator.

The median consumer expectation shows inflation will grow to 5.7% in the next year, the highest level since the metric was created in June 2013, according to the New York Federal Reserve’s Survey of Consumer Expectations. The survey respondents project that inflation will grow 4.2% in the next three years.

“Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased at both the short- and medium-term horizons. Both measures reached series highs in October,” the survey, conducted across 1,300 rotating households, read.

Expected earnings growth increased by 0.1% to 3.0 in October, another record high since the metric was created in 2013.

Mean unemployment expectations, the expected probability that the unemployment rate will increase in the next year, decreased 0.3% to 35.5% in October.

The consumer price indexed increased 5.4% year-over-year as of September, according to the U.S. Bureau of Labor Statistics (BLS), marking the greatest such increase since January 1993.  Experts point to growing demand, supply chains disruptions and labor shortages along with spikes in delta variant cases as the driver of elevated prices.

The Federal Reserve announced Wednesday that it would begin scaling back its monthly bond purchases by $15 billion per month in November to combat the surging inflation. The central bank has been buying $120 billion of bonds each month to stimulate the economy throughout the COVID-19 pandemic.

Federal Reserve Vice Chairman Richard Clarida said Monday that while he expects supply and demand imbalances to ease, future inflation spikes would pose serious problems for the central bank.

BLS is scheduled to release October’s consumer price data on Wednesday.