Fed Survey: 1-Year Inflation Outlook Jumps to 3.9%, Highest Since 2023

Americans now expect inflation to run at 3.9% over the next 12 months, the highest reading in nearly three and a half years, according to the Federal Reserve Bank of New York's Survey of Consumer Expectations released October 7, 2026. That figure is up from 3.6% in August, even though the government's own Consumer Price Index has held at a 3.4% annual rate for two straight months.

What the September survey found

Median inflation expectations increased by 0.3 percentage point to 3.9% at the one-year-ahead horizon and by 0.1 percentage point to 3.3% at the three-year-ahead horizon, while median inflation expectations were unchanged at the five-year-ahead horizon at 3.0%, the New York Fed's Center for Microeconomic Data reported. This is the highest reading for the one-year-ahead inflation expectations since May 2023. CNBC noted that when the one-year figure last stood this high, in May 2023, it was running even hotter, at 4.1%. The survey is based on a rotating panel of approximately 1,300 household heads and was fielded throughout September.

Other findings in the same release

The inflation number was not the only measure to move. Median one-year-ahead nominal household spending growth expectations increased by 0.3 percentage point to 5.5%, which the New York Fed said was the highest reading of the series since May 2023, with the increase broad-based across age and education groups. Expected income growth also ticked up, with the median expected growth in household income increased by 0.1 percentage point to 3.1%, its highest reading since February 2025. Households also grew more convinced that savings rates will rise, as the mean perceived probability that the average interest rate on savings accounts will be higher in 12 months increased by 1.5 percentage points to 30.3%, its highest reading since October 2023.

Not every part of the survey pointed to anxiety. Views on the labor market improved as workers saw a lower probability of losing their jobs and higher odds of voluntarily quitting, Bloomberg reported, citing the same release. But perceptions of personal finances slipped: more households surveyed reported they were in a worse financial situation than a year ago and expected to be in a weaker financial state in the coming year, even as income and spending growth expectations both increased, CNBC reported.

How this compares with actual price data

The survey measures what households expect, not what prices are actually doing, and the two diverge somewhat right now. The Bureau of Labor Statistics' most recent report showed the Consumer Price Index for All Urban Consumers increased 0.4 percent on a seasonally adjusted basis in August after rising 0.1 percent in July, with the all items index up 3.4 percent over the prior 12 months. That annual rate was unchanged from July. Separately, CNBC noted that inflation in August came in lower than expected, according to the Fed's preferred gauge — the Personal Consumption Expenditures price index, a different measure than CPI that the Fed itself favors for its 2% target. So the picture is mixed: the broadest monthly CPI print accelerated in August while the Fed's preferred gauge for that same month ran cooler than forecasters expected, and consumers are now bracing for more price increases ahead regardless.

A separate, differently constructed gauge told a similar story about mood. The University of Michigan's Index of Consumer Sentiment, which surveys a different sample and asks different questions, fell to 48.1 in September, its lowest reading in four months, as rising inflation fears and a worsening outlook for business conditions weighed on households. The two surveys are not directly comparable in methodology, but both point in the same direction for September.

What this means for readers

The New York Fed survey is a measure of perception, collected monthly from the same rotating panel of households, and it is one of several inputs policymakers look at when judging whether the public still trusts that inflation will come down. A rising expectation does not itself raise prices, but it can show up in how people behave: the same release found spending-growth expectations rising in step with inflation expectations, which is consistent with households budgeting for costlier goods and services ahead rather than necessarily predicting a shopping pullback. Readers managing a budget should treat the 3.9% figure as a household sentiment reading, not a forecast with the same statistical grounding as the CPI, which is built from actual transaction prices rather than survey responses.

The CPI and PCE data available so far do not show the sharp deterioration that the survey captures in sentiment. The CPI's annual rate held at 3.4% for a second straight month, meaning the official pace of price increases over the past year has not accelerated even as expectations for the year ahead have. That gap is worth watching rather than resolving in either direction based on this report alone, since expectations and realized inflation can move independently for months before converging.

What happens next

Despite the jump in expectations, markets largely expect the Federal Open Market Committee to keep benchmark rates steady when it meets later in October, CNBC reported. The next official inflation reading, covering September 2026, is due from the Bureau of Labor Statistics; its regular release calendar lists October 14, 2026 as the scheduled date for that report, which will show whether the CPI's annual rate moved from its current 3.4% reading. That print, rather than this survey, will be the first hard check on whether September's price pressures matched what households now expect.