The Federal Reserve Bank building, Manhattan.

The Federal Reserve Bank building, Manhattan. Credit: Charles Eckert

The inflation rate will remain above 6% for the next 12 months and won’t return to the 2% range seen in the past several years for some time, according to polls of business leaders released on Tuesday.

The Federal Reserve Bank of New York said executives at factories in New York State and retail and service firms in the metropolitan area expect consumer prices to rise 6.5% and 6.1%, respectively, over the next year.

Both groups of executives, who were polled this month by the bank, also predicted prices would climb 4% in 2025 and 3% in 2027. That’s significantly higher than the 2% rise that was the norm in 2018-2020.

The “responses indicate that while businesses, like consumers, expect high inflation to continue over the next year, such elevated levels of inflation are not expected to persist over longer-time horizons,” three New York Fed economists wrote in a blog post.

They continued, “If businesses and consumers expect inflation to be high in the future because it is elevated today, they may change their behavior accordingly, which can make inflation even more persistent. In other words, expectations about the path of future inflation can affect how current inflation will actually evolve.”

Nationally, inflation, as measured by the consumer price index, rose 8.3% in April, year over year, and in the New York area, up 6.3%. Both were driven by spikes in the cost of gasoline, groceries and used automobiles.

The New York Fed surveyed about 125 factories across the state and about 200 service firms in the metropolitan area from May 2 to May 9, with Long Islanders participating in both polls.

Responding to increases in the cost of raw materials, executives at retail and service firms said they have hiked prices to consumers by 4% and “predicted another 4% hike in the year ahead,” the bank said in a statement on Tuesday. “In contrast, the [typical] manufacturer reported a much larger increase of 10% for the past year but anticipated a more moderate rise of 5% in the year ahead.”

INFLATION PREDICTIONS

Median expected inflation rate over the next 12 months, in 2025 and in 2027

Factory executives: 6.5%, 4% and 3%

Retail and service executives: 6.1%, 4% and 3%

SOURCE: Polls conducted by the Federal Reserve Bank of New York on May 2-9.

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