By Jonnelle Marte

(Reuters) – U.S. consumer’s short-term inflation expectations jumped higher in November, while their expectations for future earnings growth fell. This suggests that they anticipate price rises to exceed wage gains in the near-term, according to a Monday survey by the New York Federal Reserve.

According to the Labor Department’s data, prices for food and other items are increasing at an unprecedented rate since 1982. The Fed’s expectation of raising interest rates next fiscal year is reinforced by this higher inflation.

Wage gains are being eroded by price rises, which is why the consumer survey indicates that they expect the situation to get worse in the short term. Narrow-term inflation expectations were higher in November but year-ahead earnings projections declined in November.

According to consumers, they anticipate inflation reaching a median 6.0% within one year. This is up from a October expectation of 5.7%. From 3.0% the month before, November’s expectation for an increase in year-ahead earnings was 2.8%.

This would mean that inflation will grow 3.2 percentage points faster in one-year than earnings, which is the largest gap since 2013.

The median expectation of what inflation would look like in the next three years fell to 4.0% (from 4.2%) for the first time since June, and is only the second decline since October 2020. Uncertainty about future inflation also reached new levels in the survey.

Although future price increases are expected to be less than anticipated, consumers still expect a stronger growth rate than before the outbreak of coronavirus. The median expectation for home price growth in the next year is 5%, down from October’s 5.7% but still well ahead of February 2020’s 3.1%.

Based on approximately 1,300 households, the monthly survey of consumer expectation is conducted.