How consumer choices are shaping US inflation expectations.

Policymakers are highly focused on inflation expectations after more than a year of rapid price increases. Consumers explain how they think about rising costs.

The inflation began in the bacon aisle for Dan Burnett, a 58-year-old former medical center administrator who lives in Margaretville, New York.

Last summer, he started noticing that the price of his breakfast staple was rising sharply, jumping from $8 to $10 a pack at his local grocery store. Before long, a wide variety of food products became more expensive, so much so that she began driving 45 miles to shop at Aldi and Walmart, hoping to get better deals. This summer, it looks like inflation is rampant, driving up the prices of brake repairs, hotel rooms and McDonald’s fries.

“My biggest fear is that it won’t be controlled and it will just persist,” Mr. Burnett said. He’s thinking about how he might have to reshape his financial future in a world where prices, long rising at a rate of 2 percent or less per year, are now rising considerably higher.

People like Burnett, who are beginning to believe that the US price crash could last, are the Fed’s biggest fear. If consumers and businesses expect rapid inflation to be a permanent feature of the US economy, they may begin to change their behavior so that prices continue to rise. Consumers may begin to accept price increases without shopping around, workers may demand higher wages to cover rising costs, and businesses may raise prices to cover their higher labor bills and because they believe customers will tolerate price tags. Taller.

Economists often blame that kind of spiraling inflationary mindset for fueling rapid price gains in the 1970s and 1980s, a painful episode in which inflation proved difficult to control. That’s why the Fed, which is responsible for keeping inflation in check, has focused on a variety of measures of inflation expectations, hoping that a high-price psychology doesn’t take hold.

Most signs suggest that people still believe that inflation will fade over time. But interpreting inflation expectations is more art than science: Economists disagree about which metrics matter, how to measure them, and what might cause them to change. And after more than a year of rapid price increases, central bank officials are increasingly concerned that it is foolish to take stability in price expectations for granted. Officials have been rapidly raising interest rates to try to cool the economy and send a signal to the public that they are serious about fighting downward price increases.

“There is a clock ticking here, where we have had inflation running for over a year now,” Fed Chairman Jerome H. Powell said recently. “It would be poor risk management to simply assume that those long-term inflation expectations term would remain anchored indefinitely in the face of persistently high inflation. So we’re not going to do that.”

Central bankers are closely watching measures, including the University of Michigan’s Long-Term Inflation Outlook Survey, as they try to judge whether expectations remain under wraps. Those have risen since 2020, but haven’t jumped as much as actual inflation. Still, those trackers show just where expectations are today. They say little about when they might change or what might change them.

To get a more detailed and qualitative idea of ​​how consumers think about inflation, The New York Times asked readers what costs stuck out to them, how much inflation they expected, and how they formed that opinion. The bottom line: While many people still expect inflation to decline over time, that assumption is fragile, as many Americans experience the fastest inflation of their adult lives across a wide range of goods and services.

Grocery and gasoline prices weigh heavily on many people’s minds, according to research on how consumers form price expectations. But the particular products that draw attention vary widely, expanding beyond food and gas.

Guitars, rentals and pedicures are getting more expensive in California. Crafts command higher prices in New Mexico.

People are coping with rising costs in various ways. Many said they were cutting consumption, which could help ease inflation by reducing demand and giving supply a chance to catch up. Some kept buying, hoping that costs would moderate over time. But others were asking for higher wages or trying to find other ways to cover their rising costs while resigning themselves to raising prices.

For Siamac Moghaddam, a 37-year-old Marine who lives in San Diego, dealing with inflation has been less about cutting back on the little things, like the pedicures he likes to get, since he wears boots all the time. and more on how to save on big expenses like rent. His landlord recently increased the rent on his apartment by $200, so he moved from his two-bedroom apartment to a one-bedroom.

“Everyone is adapting,” he said. He believes the Fed’s rate hikes will control inflation, though in the process, “I think we’re going to suffer economically.”

Robert Liberty, 68, of Portland, Oregon, is trying to save on food and travel.

“I picked up an avocado at the store and threw my hand back like I was about to burn myself when I saw the price — it was $5.50 an avocado,” said Mr. Liberty, a part-time attorney and consultant whose husband works full-time. . He believes that inflation will moderate, although he is not sure by how much. For now, an avocado, he said, is “something we can do without.”

Fontaine Weyman, a 43-year-old composer from Charleston, South Carolina, is closer to the middle of the range of inflation expectations. Mrs. Weyman delivers for Instacart and, with her husband, has a family income of about $80,000. Starbucks has always been her personal pleasure, but she’s cutting it out.

“It’s $6.11 for just a Venti iced coffee with some cold froth on top, that’s like $180 a month,” Ms. Weyman said.

While she still believes that inflation will fade over time, she and her husband are thinking about how to increase their household income if it doesn’t.

“We know that you will most likely get a 5 to 10 percent raise anyway in March, but I asked you to ask for 15 percent,” he said.

That pattern — cutting back and hoping for the best, but also planning for a possible future with higher inflation — is what Susan Hsieh is adopting as she watches costs rise at Costco. Ms. Hsieh lives in Armonk, New York, with her husband and two teenage children, and has cut back on buying frozen Chilean sea bass fillets because their price has risen sharply, which is sad news for Ms. Hsieh’s family. she.

“That fish is really tasty,” he said.

Rising costs for goods and services have also prompted Ms Hsieh, who works at a branch of the US Treasury, to ask for a higher salary this year. She knew that the 2.2 percent raise she was going to get as a typical cost-of-living adjustment was not going to keep up with inflation. She finished just shy of a 5 percent increase.

“I think I’m going to ask again,” he said of his salary negotiation next year, assuming inflation holds.

Bacon-buying Mr. Burnett might offer the starkest example of why expectations of faster inflation could spell trouble for the Fed if they start to consolidate in earnest. For him, the breadth of today’s price swings makes it hard to believe that inflation will fade anytime soon.

Mr. Burnett, who is retired, is thinking of adapting his life accordingly. He co-owns a Florida condo with his sister, and unit maintenance fees are rising. Although he rents the condo to tenants for only part of the year, he will likely pass on the entire increase to them.

He likes the tenants and doesn’t want to raise the rents enough to drive them out, but he could also see himself and his sister charging even more if they realize neighboring landlords are raising prices.

“I really want to make sure I’m maximizing revenue,” he said, given inflation. And he believes that other people will do the same, which is what makes him think that inflation is unlikely to go away anytime soon. “Once people have this mentality of ‘You can raise prices and people will just pay for it,’ you’re ready for the races.”

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