(Bloomberg). After months of rising prices, inflation expectations for Americans rose to an all-time high in the new year according to a Federal Reserve Bank of New York survey.

According to the Survey of Consumer Expectations, October’s Household Expectations for Inflation in the Next 12 Months climbed to 5.7% from 5.3% in September. Median inflation expectations for the next three year remained stable at 4.2%. These figures represent the highest level of inflation since 2013, when the survey was started.

The numbers highlight one of the risks that’s persuaded Fed officials to shift toward tighter monetary policy. 

The U.S. central bank has chalked up this year’s elevated inflation rates to supply-chain bottlenecks and other transitory pressures tied to the reopening of the economy after pandemic lockdowns. But as those drivers of higher prices proved to be bigger and longer-lasting than anticipated, there’s concern that households might come to expect more of the same — and that shift could entrench inflation at above the 2% target.  

The Fed said last week that it would begin to wind down bond purchases in the latter part of the month. However, Chair Jerome Powell stated that the Fed can remain patient about raising interest rates. 

The central bank’s preferred inflation gauge was at 4.4% in September, the highest since 1991. On Wednesday the Labor Department will publish October’s consumer-price index. It’s forecast to show an annual rate of 5.9%.

The New York Fed survey showed that Americans foresee faster price increases over the coming year for items like rent and food, which take up a big chunk of household spending and can’t easily be substituted. The expectation of higher food and fuel prices was above 9%. For rents, it rose to 10.1% which is the highest ever recorded. 

Americans were also slightly less optimistic about their households’ financial situations in the year ahead. In the three-month period ending in May 2020, Americans were more likely to miss a minimum payment than they are now by increasing their perception of the probability. This is the highest level since May 2020.

©2021 Bloomberg L.P.