Survey Shows Consumers see Future Tax Increases and Expansions of Government Assistance and Insurance Programs as Increasingly Unlikely

NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the April 2022 Public Policy Survey, which is part of the broader Survey of Consumer Expectations (SCE), and provides information on individuals’ expectations regarding future changes in a wide range of public policies.  Tracking individuals’ subjective beliefs about future policy changes is important for understanding their behavior as consumers and workers. These data have been collected every four months since November 2015 and have been released publicly since October 2019. In addition to several assistance programs, the survey measures respondents’ expectations about social insurance programs, labor market policies, taxes, and fees. For each program or policy, the survey asks respondents to assign the percent chance of an increase/expansion, a decrease/reduction, or no change over the next twelve months.

The April 2022 survey shows several interesting changes in the public’s expectations regarding federal assistance and social insurance programs. Following the outbreak of the pandemic in March 2020 and the 2020 general election, and lasting until about August 2021, there was a steady rise in the average likelihood respondents assign to an increase or expansion in housing, welfare, and unemployment benefits, in subsidized preschool education and in federal student aid. Since then, the survey shows a strong reversal in the average likelihood of expansions in these programs as respondents increasingly expect no changes in these policies over the next twelve months. As shown in the interactive charts on the survey website, largely similar patterns emerge for expansions in Medicare, social security benefits, parental leave policies, and for an increase in the federal minimum wage.

While expectations of future program expansions in April 2022 remain somewhat above pre-pandemic levels, this is a notable turnaround in the general public’s beliefs, one that followed the implementation of large economic stimulus and relief packages and coincided with a gradual improvement in economic conditions and a changing political landscape less conducive for such expansions. Interestingly, this pattern also appears for expectations of increased student debt forgiveness. While current readings of an average 32 percent chance of such an increase remains well above the December 2019 level of 18 percent, it has seen a meaningful decline since reaching a peak of 43 percent in April 2021, revealing a considerable decline in optimism about an increase in student loan forgiveness.

With the recent reductions in perceived prospects of future expansions in government support programs, the survey also reveals a decline in the reported likelihood of future tax increases. Following a steady rise in the perceived likelihood of an increase in capital gains, income, payroll and gas tax rates between December 2019 and April/August 2021, the survey shows a decline in such expectations since. For most tax rates, consumers consider it increasingly likely that these rates will remain unchanged in the year ahead. In the case of gas taxes, in addition to an increased expectation of no-change, the survey also shows a considerable uptick in the perceived chance of a cut in gas taxes.

Finally, the results reveal little change in respondents’ expectations regarding future changes in the mortgage interest deduction and in public college tuition, and a slight rise in the prospect of higher public transportation fees.

Key findings from the April 2022 Survey are:

Expectations about Public Assistance Programs

  • The average perceived likelihood of an increase in housing assistance and affordable housing over the next twelve months declined to 37 percent in April 2022, from a peak of 52 percent in August 2021.
  • The mean probability of an expansion in free or subsidized preschool education dropped to 34 percent from 40 percent in April 2021, and a peak of 43 percent in August 2021.
  • The average probability assigned to an increase in federal student aid or Pell grants dropped to 28 percent from a series high of 39 percent in April 2021, with the average percent chance of no change in student aid increasing by about the same amount. The mean probability of an expansion in federal student debt forgiveness fell to 32 percent from a series high of 43 percent in April 2021.
  • Prospects of an increase in welfare or unemployment benefits declined sharply over the past year, with the average probability assigned to an increase falling from, respectively, 49 percent and 45 percent in April 2021 to 35 and 26 percent in April 2022.
  • Similarly, the average perceived likelihood of a rise in Medicare or social security retirement benefits dropped to 24 and 25 percent from series highs of 31 and 29 percent, respectively in August 2021.
  • The mean probability assigned to an increase in the federal minimum wage declined to 39 percent from a series high of 50 percent in April 2021. In contrast there was no meaningful change in the perceived prospects of a rise in the state minimum wage.
  • The average likelihood of an expansion over the next twelve months in paid parental leave fell to 26 percent, from a peak of 34 percent in August 2021.
  • The recent declines in the measures above were largely broad-based across age, gender, education, and income groups.

Expectations about Taxes and Fees

  • The average perceived likelihood of an increase over the next twelve months in the capital gains tax rate declined to 42 percent in April 2022, from a peak of 52 percent in August 2021.
  • The mean probability assigned to an increase in gasoline taxes decreased sharply to 47 percent from 61 percent in December 2021 and 63 percent in April 2021. The average probability of a gas tax decline jumped to 15 percent from 7 percent in December 2021.
  • The average perceived likelihood of an increase in the average income tax rate declined to 45 percent from a series high of 53 percent in August 2021. The average likelihood of an increase in income tax rate for the highest income bracket declined to 49 percent from a series high of 65 percent in December 2020.
  • The average probability assigned to an increase in the payroll tax rate also declined to 40 percent from a series high of 50 percent in August 2021.
  • Expectations about year-ahead changes in the mortgage interest deduction were largely stable over the past year.
  • Similarly, the mean perceived likelihood of an increase in public college tuition was mostly unchanged.
  • Finally, the average probability assigned to an increase in the cost of public transportation increased to 49 percent from 42 percent in April 2021, a new series high.

Detailed results are available here.

Source: Federal Reserve Bank of New York

23 May 2022

Renewed Statement of Commitment to the FX Global Code

Foreign Exchange

(Originally published 4 April 2022)

The Federal Reserve Bank of New York (New York Fed) today released its renewed Statement of Commitment to the FX Global Code (Code). The Code, which was initially published May 2017, is a set of global principles of good practice in the foreign exchange market, developed to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market. It was developed by a partnership between central banks and Market Participants from around the globe and most recently was updated in July 2021.

The New York Fed has reviewed the content of the updated Code and, in issuing this Statement of Commitment, has confirmed that it acts as a Market Participant as defined by the Code. The New York Fed is committed to conducting its foreign exchange market activities, when acting as a Market Participant, in a manner consistent with the principles of the Code.

The purpose of the Code is to promote a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of Market Participants, supported by resilient infrastructure, are able to confidently and effectively transact at competitive prices that reflect available market information and in a manner that conforms to acceptable standards of behavior. The Code is promoted, maintained and updated on a regular basis by the Global Foreign Exchange Committee (GFXC).

Source: Federal Reserve Bank of New York

Michael Held Resigns from the New York Fed

Central Bank News

April 07, 2022

NEW YORK—The Federal Reserve Bank of New York today announced that Michael Held has decided to step down from his role as General Counsel and Head of the Legal Group. He will be leaving the Bank in June 2022 and in the interim will move to an advisor role to help facilitate a smooth transition. YoonHi Greene and James Bergin, both Deputy General Counsel, will co-lead the group until a successor is named.

“For two and a half decades, Mike has been a dedicated public servant whose efforts have had a meaningful impact supporting the New York Fed’s mission,” said John C. Williams, President and Chief Executive Officer of the New York Fed. “With sound judgment and deep expertise, Mike has leveraged his leadership skills to better the work that we do and how we do it. I want to thank him for his impressive career and the legacy that he leaves behind.”

As General Counsel, Mr. Held has been a member of the Bank’s Executive Committee and has served as Deputy General Counsel of the Federal Open Market Committee.

“It has been an honor to work with such a talented and committed group of central bankers,” said Mr. Held. “I count myself lucky to have had the privilege to be part of this incredible team for as long as I have.”

During his tenure, Mr. Held advised the Bank’s senior leaders on a wide range of matters, including regulation and supervision of financial institutions, anti-money laundering and OFAC, corporate investigations, corporate governance and ethics, director responsibilities, and litigation. In addition, he developed the New York Fed’s first pro bono program and was an executive sponsor of the Financial Institutions Culture & Conduct initiative. He previously served as the Bank’s Corporate Secretary and has been a Deputy General Counsel in the Legal Group. Mr. Held joined the New York Fed in 1998 as a staff attorney.

The New York Fed will soon launch a search for Mr. Held’s successor.

Contact
Suzanne Elio
(212) 720-6449
suzanne.elio@ny.frb.org

Betsy Bourassa
(212) 720-6885
betsy.bourassa@ny.frb.org

Source: Federal Reserve Bank of New York

Consumer Spending Growth Expectations Spike, while Inflation Expectations Edge Back Up

March 14, 2022

NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the February 2022 Survey of Consumer Expectations, which shows an increase in short-and medium-term inflation expectations, reversing some of last month’s sharp declines. Median home price expectations, on the other hand, declined. Year-ahead earnings growth expectations remained unchanged, while expectations about unemployment, perceived job loss, and job finding expectations all improved. Spending growth expectations for the year ahead reached a new series high. Expectations about future credit access deteriorated noticeably.

The main findings from the February 2022 Survey are:

Inflation

  • Median one-year-ahead inflation expectations increased to 6.0% in February from 5.8% in January, matching its November 2021 series’ high. The increase was widespread across age, education, and income groups, but largest for the respondents without a high school degree. After a sharp decline in January, median three-year ahead inflation expectations ticked up by 0.3 percentage point to 3.8%, while remaining below its November and December 2021 levels of 4.2% and 4.0%, respectively. The survey’s measures of disagreement across respondents (the difference between the 75th and 25th percentiles of inflation expectations) remained unchanged at both horizons and well above their pre-pandemic readings.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased slightly at the one-year horizon and increased at the three-year horizon. Both measures remain elevated relative to their pre-pandemic levels.
  • Median year-ahead home price change expectations decreased to 5.7% from 6.0%. The decline was most pronounced for respondents without a college education.
  • All the commodity price change expectations the survey elicited increased in February. Median expectations about year-ahead price changes for food and gas increased by 3.3 and 1.5 percentage points to 9.2% and 8.8%, respectively. The median year-ahead expected change in the costs of medical care and college education increased to 9.6% and 9.0%, from 9.5% and 7.3%, respectively. The median expected one-year-ahead change in the price of rent increased to 10.1%, from 9.8%.

Labor Market

  • Median one-year-ahead expected earnings growth was unchanged for the second consecutive month at 3.0% in February and remains above its 12-month trailing average of 2.6%.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased to 34.4% from 35.9%. The decline was broad-based across age, education, and income groups.
  • The mean perceived probability of losing one’s job in the next 12 months declined by 0.8 percentage point to 10.8%, reaching a new series low. The mean probability of leaving one’s job voluntarily in the next 12 months also decreased to 18.9% from 19.3%.
  • The mean perceived probability of finding a job (if one’s current job was lost) increased to 56.5% from 55.7%, remaining above its trailing 12-month average of 54.0%. The increase was driven by respondents without a high school degree.

Household Finance

  • The median expected growth in household income fell by 0.1 percentage point to 3.2% in February, but remains above its trailing 12-month average of 3.0%.
  • Median year-ahead household spending growth expectations increased sharply to 6.4% from 5.5% in January, reaching a new series high since the start of the series in June 2013. The increase was broad-based across age, income, and education groups.
  • Expectations about future credit availability deteriorated considerably, with more respondents expecting it will be harder and substantially fewer respondents expecting it will be easier to obtain credit in the year ahead. Perceptions of credit access compared to a year ago also deteriorated, with more (fewer) respondents finding it harder (easier) to obtain credit now than a year ago.
  • The average perceived probability of missing a minimum debt payment over the next three months decreased by 0.8 percentage point to 9.2%, a new series low.
  • The median expectation regarding a year-ahead change in taxes (at current income level) increased slightly to 4.5% from 4.4%.
  • Median year-ahead expected growth in government debt remained unchanged at 11.1%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now increased to 31.3% from 30.5% its highest level since May 2019.
  • Perceptions about households’ current financial situations compared to a year ago deteriorated slightly, with more (fewer) respondents reporting being financially worse (better) off than they were a year ago. Respondents were mixed about their household’s financial situation in the year ahead, with a larger share of respondents expecting their financial situation to deteriorate and also a larger share of respondents expecting their financial situation to improve a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased by 1.5 percentage points to 37.0%. This is the lowest reading of the series since June 2013.

About the Survey of Consumer Expectations

The Survey of Consumer Expectations (SCE) contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty regarding consumers’ outlooks. Expectations are also available by age, geography, income, education, and numeracy. 

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, this panel allows the survey to report the changes in expectations and behavior of the same individuals over time. For further information on the SCE, please refer to an overview of the survey methodology here, the interactive chart guide, and the survey questionnaire.

Contact
Mariah Measey
(347) 978-3071
Mariah.Measey@ny.frb.org 

Source: Federal Reserve Bank of New York

Interbank Market News Scan: U.S. to release 30 million barrels of oil from its strategic petroleum reserves.

Interbank, Federal Reserve Bank of New York, credit. “The Federal Reserve Bank of New York today released the second installment of The State of Low-Income America: Credit Access and Debt Payment. The report finds that payment rates and median credit scores rose for all income groups through September 30, 2021.” See press release and report here. Source: Federal Reserve Bank of New York.

International Energy Agency, European Commission, White House. President Joe Biden announces release of 30 million barrels of oil from the United States’ strategic petroleum reserves. See press release here, Source: Executive Office of the President.

Interbank, Treasury, South Korea. “The United States and Korea pledged to continue to work closely with the international community to respond to Russia’s aggressive actions that violate Ukraine’s sovereignty.” See press release here. Source: U.S. Department of the Treasury.

Foreign exchange rates of interest at 3:15 pm AST

EUR/USD=1.11917

GBP/USD=1.33881

USD/CAD=1.27352

USD/MXN=20.5102

USD/JPY=115.336

USD/NGN=415.632

USD/INR=75.3584

USD/CNY=6.3095

Source: OANDA

Dollar Index=97.39

Source: MarketWatch

Interbank Market News Scan: American consumers expect decrease in inflation headwinds over the next three years.

February 14, 2022

NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the January 2022 Survey of Consumer Expectations, which shows a decrease in short- and medium-term inflation expectations. Median home price expectations, however, increased above its 2021 average. Labor, income, and spending expectations were all largely stable in January.

The Federal Reserve Bank of New York also issued an accompanying Liberty Street Economics blog post on how consumers’ inflation expectations have responded to inflation during the pandemic.

The main findings from the January 2022 Survey are:

Inflation

  • Median one-year-ahead inflation expectations decreased to 5.8% in January from 6.0% in December. This is the first decline in short-term inflation expectations since October 2020. Similarly, median three-year ahead inflation expectations decreased by 0.5 percentage point to 3.5%. The decline in medium-term inflation expectations was broad-based across age, education, and income groups and is the largest one month decline in the measure since the inception of the survey in 2013. Both measures of inflation expectations, however, remain elevated compared to their pre-COVID-19 readings. Our measures of disagreement across respondents (the difference between the 75th and 25th percentiles of inflation expectations) increased at the short-term horizon, but decreased at the medium-term horizon.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—remained unchanged at the one-year horizon and decreased slightly at the three-year horizon. Both measures remain well above their pre-pandemic February 2020 readings.
  • Median year-ahead home price change expectations increased to 6.0% from 5.5%, above its 2021 average of 5.4%. The increase was most pronounced among respondents with no more than a high school education and those who live in the “West” and “Northeast” Census regions.
  • The commodity price change expectations elicited in the survey all declined in January. The expectations about year-ahead price changes for food, rent, gas, and medical care all declined by 0.1 percentage point to 7.7%, 9.8%, 5.6%, and 9.5%, respectively. The median one-year ahead expected change in the cost of a college education decreased by 0.7 percentage points to 7.3%.

Labor Market

  • Median one-year-ahead expected earnings growth was unchanged at 3.0% in January and remains above its 2021 average of 2.6%.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased by 0.7 percentage point to 35.9%.
  • The mean perceived probability of losing one’s job in the next 12 months remains unchanged at 11.6%, well below its pre-pandemic reading of 13.8% in February 2020. The mean probability of leaving one’s job voluntarily in the next 12 months decreased to 19.3% in January, from 19.9%.
  • The mean perceived probability of finding a job (if one’s current job was lost) declined to 55.6% in January from 57.5%, but remains well above its 12-month trailing average of 53.5%.

Household Finance

  • The median expected growth in household income fell by 0.1 percentage point to 3.3% in January, but remains above its trailing 12-month average of 2.9%.
  • Median year-ahead household spending growth expectations remained unchanged at 5.5%, substantially above its pre-pandemic level.
  • Perceptions of credit access compared to a year ago deteriorated slightly in January, with more respondents finding it harder to obtain credit now than a year ago. Expectations for future credit availability deteriorated slightly as well with more respondents expecting it will be harder to obtain credit in the year ahead.
  • The average perceived probability of missing a minimum debt payment over the next three months decreased by 0.3 percentage point to 10.0%, which is slightly below the 12-month trailing average of 10.1%.
  • The median expectation regarding a year-ahead change in taxes (at current income level) was unchanged at 4.4%. 
  • Median year-ahead expected growth in government debt increased by 0.3 percentage point to 11.1%, which is the second lowest reading since December 2020.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now increased to 30.5% in January, from 28.2%. This is the highest reading of the series since May 2019.  
  • Perceptions about households’ current financial situations compared to a year ago improved slightly, with fewer respondents reporting being financially worse off than they were a year ago. Respondents were slightly more pessimistic about their household’s financial situation in the year ahead, with more respondents expecting their financial situation to deteriorate a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased by 0.4 percentage point to 38.5%.

About the Survey of Consumer Expectations (SCE)

The Survey of Consumer Expectations (SCE) contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty regarding consumers’ outlooks. Expectations are also available by age, geography, income, education, and numeracy. 

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, this panel allows us to observe the changes in expectations and behavior of the same individuals over time. For further information on the SCE, please refer to an overview of the survey methodology here, the interactive chart guide, and the survey questionnaire.

Contact
Mariah Measey
(347) 978-3071
Mariah.Measey@ny.frb.org 

Source: Federal Reserve Bank of New York

Treasury, Federal Reserve did not intervene in foreign exchange markets during 4th quarter 2021

NEW YORK—The Federal Reserve and U.S. Treasury did not intervene in foreign exchange markets during the October – December 2021 quarter, the Federal Reserve Bank of New York said today in its quarterly report to the U.S. Congress.

The U.S. dollar, as measured by the Federal Reserve Board’s broad trade-weighted dollar index, appreciated 0.6 percent in the fourth quarter of 2021. The move primarily reflected U.S. dollar appreciation against the Japanese yen and the euro as U.S. shorter-dated yields rose relative to yields in the euro area and Japan following the Federal Reserve’s signaling of a faster-than-anticipated withdrawal of policy accommodation. Broad U.S. dollar appreciation was limited by positive risk sentiment late in the quarter as concerns over the economic growth impact of a new COVID-19 variant waned, as well as strength in some emerging market currencies as many emerging market central banks continued to increase their policy rates. The U.S. dollar appreciated 3.4 percent against the Japanese yen and 1.9 percent against the euro, while depreciating 2 percent against the Swiss franc, 1.4 percent against the Chinese renminbi, 0.5 percent against the Mexican peso, and 0.4 percent against the British pound.

The report was presented by Lorie Logan, executive vice president of the Federal Reserve Bank of New York and the Federal Open Market Committee’s manager for the System Open Market Account, on behalf of the Treasury and the Federal Reserve System.

The full report is available on the New York Fed’s website.

Source: Federal Reserve Bank of New York

Interbank market news scan: BIS releases paper on virtual banking; forex rates of interest to Atlanta; Ethereum strengthens slightly

Bank of International Settlements. Today, the Bank of International Settlements released a paper on virtual banking providing insights on the use of information capital as a substitute for tangible capital. The paper argues that information capital, comprised of an enterprise’s or individual’s digital data footprint, can be used as collateral for obtaining credit, thus increasing access to credit by small and medium businesses and low income individuals.

While the paper uses the Hong Kong market as a case study, I believe that if US-based banks and fintechs embarked on the same initiative, the following legal issues may arise. Can information capital be used as collateral when borrowing for the purpose of purchasing foreign currencies? Does the use of information capital raise discrimination issues where biases are embeded in the artificial intelligence programming? Are existing laws sufficient for protecting enterprise or individual data privacy where such data is encompassed in information capital used as collateral?

The link to the BIS paper can be found here.

Federal Reserve Bank of New York. Yesterday after the Board of Governors of the Federal Reserve announced that it would hold its interbank rate for overnight lending between 0 and .25%, the Federal Reserve Bank of New York announced that the reserve bank’s Open Market Trading Desk would increase its System Open Market Account holding of Treasury securities by at least $20 billion per month and its agency mortgage-backed securities by at least $10 billion per month. This reduced level of purchasing (down from a combined high of $120 billion per month at the beginning of the pandemic) will commence on 14 February 2022.

The link to the New York Fed’s announcement can be found here.

Interbank Market, Pakistan. The rupee held steady against the dollar at Rs176.98 but has been depreciating in value since 1 July 2021. See link to article here.

Foreign exchange rates as of 10:00 am EDT

EUR/USD=1.1282

GBP/USD=1.3500

USD/MXN=20.6258

USD/GTQ=7.5060

USD/NGN=414.7010

USD/GHS=6.1790

USD/VND=22,632.2000

USD/JPY=114.1900

USD/INR=74.8041

USD/BTC=0.00003

USD/ETH=0.00039

Source: OANDA

Federal Reserve Bank of New York sees no changes in short-term, long-term inflation …

Short- and Medium-Term Inflation Expectations Unchanged; Job and Income Expectations Strengthen Further

NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the December 2021 Survey of Consumer Expectations, which shows that both short- and medium-term inflation expectations were unchanged. Uncertainty and disagreement about future inflation decreased at both the short- and medium-term horizons. Home price expectations rose in December but remained below their May 2021 peak. Households reported increased optimism about their labor market prospects, with earnings growth, job loss, and job finding expectations all improving. Households’ income growth expectations also improved, rising to a new series high.

The main findings from the December 2021 Survey are:

Inflation

  • Median one-year and three-year-ahead inflation expectations both remained unchanged in December at 6.0% and 4.0%, respectively. The Survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at both the one- and three-year horizons.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased at the short- and medium-term horizons, retreating from their series highs recorded in November.
  • Median home price expectations increased to 5.5% from 5.0% in November. The increase was driven by those below age 60 and those who live in the “South” and “West” Census regions.
  • Expectations about year-ahead price changes fell by 3.5 percentage points for the price of gas (to 5.7%), 1.4 percentage points for food prices (to 7.8%), and 1.0 percentage point for the cost of a college education (to 8.1%). The median expected change in the price of medical care and rent remained unchanged at 9.6% and 10.0%, respectively.

Labor Market

  • Median one-year-ahead expected earnings growth increased by 0.2 percentage point in December to 3.0%. The increase was most pronounced for respondents with an annual household income below $50,000.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased by 0.9 percentage point to 35.2%.
  • The mean perceived probability of losing one’s job in the next 12 months decreased by 1.3 percentage points to 11.6%. Similarly, the mean probability of leaving one’s job voluntarily in the next 12 months decreased by 0.3 percentage point to 19.9%.
  • The mean perceived probability of finding a job (if one’s current job was lost) increased to 57.5% from 55.9% in November, its highest level since its pre-COVID reading of 58.7% in February 2020. The increase was driven by respondents at least 40 years old and those without a college degree.

Household Finance

  • The median expected growth in household income increased by 0.2 percentage point to 3.4% in December, a new series high. The increase was most pronounced for respondents with no more than a high school diploma.
  • Median household spending growth expectations declined to 5.5% from a series high of 5.7% in November. The decrease was driven by respondents with household income under $50,000 a year and those with no more than a high school diploma.
  • Perceptions of credit access compared to a year ago slightly improved, with more respondents saying it is easier to obtain credit than one year ago on average. Expectations for future credit availability also improved, with more respondents expecting it will be easier to obtain credit in the year ahead compared to in November.
  • The average perceived probability of missing a minimum debt payment over the next three months increased by 0.3 percentage point to 10.3%. The increase was driven by those with some college education.
  • The median expectation regarding a year-ahead change in taxes (at current income level) decreased by 0.3 percentage point to 4.4%.
  • Median year-ahead expected growth in government debt decreased by 1.6 percentage points to 10.8%, its fifth consecutive monthly decrease.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now decreased by 0.5 percentage point to 28.2% in December.
  • Perceptions about households’ current financial situations compared to a year ago improved slightly. However, more households still reported a worse situation compared to a year ago than reporting an improved situation. Year-ahead expectations about households’ financial situations also improved, with fewer households expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased slightly by 0.2 percentage point to 38.9%.


About the Survey of Consumer Expectations (SCE)

The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty regarding consumers’ outlooks. Expectations are also available by age, geography, income, education, and numeracy.

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, this panel allows us to observe the changes in expectations and behavior of the same individuals over time. For further information on the SCE, please refer to an overview of the survey methodology here, the interactive chart guide, and the survey questionnaire.

Contact
Mariah Measey
(347) 978 3071
Mariah.Measey@ny.frb.org

The Federal Reserve, U.S. Congress is quiet this week …

All is quiet at the Board of Governors of the Federal Reserve System this week, at least when it comes to communications from the Board’s governors. None of the governors have speeches scheduled this week.

Congress continues its holiday with no hearings scheduled for the U.S. Senate Committee on Banking, Housing, and Urban Affairs until 5 January 2022. The U.S. House Committee on Financial Services has not yet set a calendar for January 2022.

The Federal Reserve Bank of New York has a quiet calendar this week with no events impacting interest rates or foreign exchange scheduled this week. The holidays continue.

Alton Drew

27,12,2021