Aug 7, 03:03 PM

New York Fed: 1-Year Inflation Expectations Rise to 3.1%, 5-Year at 2.9%, Home Prices Stable, Labor Market Outlook Improves Amid Tariff Effects

The Federal Reserve Bank of New York reported a slight increase in U.S. consumer inflation expectations for July 2025. The one-year-ahead inflation expectation rose to 3.1% from 3.0% in June, while the three-year-ahead expectation remained steady at 3.0%. The five-year-ahead expectation increased to 2.9% from 2.6% in June, marking the highest level since February 2025. Home price rise expectations remained stable at 3%. The survey also indicated an improved perception of the labor market among consumers. Analysts attribute the modest rise in inflation expectations partly to retailers gradually raising prices on goods subject to higher import tariffs, which took effect in April 2025. Goldman Sachs' analysis suggests that through June 2025, foreign exporters absorbed 14% of U.S. tariffs, U.S. companies absorbed 64%, and consumers bore 22% of the tariff costs. However, the share of tariff costs passed to consumers is expected to increase to 67% if the current pattern continues, potentially boosting core Personal Consumption Expenditures (PCE) inflation by 0.66% over the remainder of the year and pushing core PCE inflation to 3.2% by year-end.

#Goldman Sachs #Personal Consumption Expenditures

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