Median one-year-ahead expectations for the annual rate of inflation fell to 5.7% in August from 6.2% in July—still relatively high but far lower than the actual inflation rates we’ve seen all summer, with prices up 8.5% in July from the year before. Three-year-ahead projections fell from 3.2% to 2.8%, not far from the Fed’s target rate of 2%. Meanwhile, more respondents believe their incomes will rise, as median expectations for rising income hit a record high of 3.5% in August. Fewer households reported they were in a worse financial situation compared to a year ago, and fewer households expect to be worse off a year from now. If you’re hoping to buy a home, you might also see prices continue to come down—or at least that’s what most people expect, with median home price growth expectations declining sharply to 2.1%, in the lowest reading since July 2020. That’s below pre-pandemic levels, reflecting broad declines across the country. In perspective, home price expectations have now fallen by nearly two-thirds since the April 2022 reading of 6.0%. Tomorrow, the Bureau of Labor Statistics will release its update to the Consumer Price Index (CPI) for August, with economists forecasting the annual rate of inflation to come down to 8% year-over-year. While still relatively high and near its multi-decade highs early this summer, it would be lower than July’s 8.5%.
