December 2025 Survey of Consumer Expectations: A Breakdown of Household Inflation Expectations

The Federal Reserve Bank of New York's Center for Microeconomic Data recently released the December 2025 Survey of Consumer Expectations, providing valuable insights into households' inflation expectations. This report summarizes the key findings and their implications.

Inflation Expectations: A Key Driver of Monetary Policy

Household inflation expectations play a crucial role in shaping monetary policy decisions. The survey measures consumers' expectations about future inflation rates, which can influence their spending and saving behavior. In this report, we'll delve into the December 2025 Survey of Consumer Expectations and explore its key findings.

Key Findings

The December 2025 Survey of Consumer Expectations revealed several notable trends in household inflation expectations:

1. Inflation Expectations Remain Elevated

Household inflation expectations remain elevated, with 64% of respondents expecting inflation to rise over the next year. This is a significant increase from previous surveys, suggesting that consumers are becoming increasingly optimistic about future price growth.

2. Food and Energy Prices Continue to Pose Concerns

Food and energy prices continue to be major concerns for households. Respondents cited these categories as the most likely to affect their purchasing power in the next year. The persistence of inflation expectations in these areas highlights the need for policymakers to address supply chain disruptions and price stability.

3. Uncertainty about Future Economic Conditions

Households are increasingly uncertain about future economic conditions, with 55% of respondents expecting the economy to worsen over the next year. This increase in uncertainty may lead to decreased consumer confidence and reduced spending.

4. Shifting Expectations for Interest Rates

Respondents' expectations for interest rates have shifted slightly in the past quarter. While 44% still expect interest rates to rise, this represents a decrease from previous surveys. This shift suggests that consumers may be becoming more cautious about future economic conditions and are less optimistic about interest rate increases.

5. Age-Specific Expectations

Inflation expectations vary significantly across age groups. Younger households (aged 25-34) have the most optimistic views on inflation, while older households (aged 55-64) are more pessimistic. This highlights the importance of considering demographic factors when analyzing household inflation expectations.

Implications for Monetary Policy

The December 2025 Survey of Consumer Expectations has significant implications for monetary policy decisions:

1. Monetary Policymakers Should Monitor Inflation Expectations Closely

Central banks should closely monitor inflation expectations to gauge the overall level of uncertainty and risk aversion among households. This will help policymakers make informed decisions about interest rate adjustments.

2. Addressing Supply Chain Disruptions and Price Stability

Policymakers should prioritize addressing supply chain disruptions and price stability to alleviate concerns about food and energy prices. This can be achieved through targeted policy interventions, such as infrastructure investments and trade agreements.

3. Encouraging Consumer Confidence

To boost consumer confidence, policymakers can implement policies that promote economic growth and stability, such as increased investment in education and job training programs.

Conclusion

The December 2025 Survey of Consumer Expectations provides valuable insights into household inflation expectations. The survey's findings highlight the need for policymakers to address supply chain disruptions and price stability, while also promoting consumer confidence. By monitoring inflation expectations closely and implementing targeted policy interventions, monetary policymakers can make informed decisions that promote economic growth and stability.

Recommendations

Based on the key findings of the December 2025 Survey of Consumer Expectations, we recommend the following:

1. Targeted Policy Interventions: Policymakers should prioritize addressing supply chain disruptions and price stability through targeted policy interventions.
2. Increased Investment in Education and Job Training: Governments can invest in education and job training programs to promote consumer confidence and economic growth.
3. Monitoring of Inflation Expectations: Central banks should closely monitor inflation expectations to gauge the overall level of uncertainty and risk aversion among households.

Future Directions

The December 2025 Survey of Consumer Expectations provides a valuable snapshot of household inflation expectations at this critical juncture in the economic cycle. As policymakers continue to navigate the complexities of monetary policy, future surveys will be essential for tracking shifts in consumer attitudes and expectations.

By analyzing these trends and implementing targeted policy interventions, policymakers can promote economic growth and stability while managing inflation expectations effectively.