In August, consumers saw inflation for the next 12 months at 5.75%, down from 6.2% in July, the lowest rate since October 2021, according to the New York Fed’s monthly survey of consumer expectations. They forecast inflation averaging 2.8% over the next three years — the slowest pace since late 2020 — after estimating inflation at 3.2% over that horizon in July.

The findings may bring some comfort to Federal Reserve officials, who fear that inflation, the highest in 40 years, will alter consumer sentiment about the sustainability of current price shocks, making it more difficult for policymakers to keep inflation under control.

The Federal Open Market Committee – the central bank’s policy-making arm – is expected to raise rates on the central bank’s overnight notes again from the current range of 2.25%-2.50% at its September 20-21 meeting. The central bank has already raised interest rates by 75 basis points, and futures contracts tied to Fed expectations predict a third hike by that rate next week.

The survey brought some optimistic news to the labor market, which central bank officials expect to weaken somewhat as they raise interest rates to dampen overall activity and demand.

Consumers who responded to a New York Fed survey in August were less likely to lose a job in the coming year than they were in July, and less likely to find a new job if they lost their current job. Additionally, the percentage of people who thought they would leave their current job fell to the lowest level since March 2021.