Key Points

  • A survey released by the New York Fed on Tuesday showed that consumers' one-year-ahead inflation expectations rose to 3.4% in March, with households expecting gasoline prices to increase by 9.4% over the next 12 months.
  • Consumers do not expect wage growth to alleviate price pressures. The New York Fed said the median expectation for wage growth among consumers fell by 0.1 percentage point last month to 2.4%, at the low end of the range since May 2021.
  • Rising inflation could dampen consumer spending, Chicago Fed President Austan Goolsbee said on Tuesday. "My current concern is that we have to deal with an oil price shock that will push prices up in a stagflationary way," he said. He added, "There is heightened anxiety about rising costs and the return of inflation."

Deeper Analysis

The U.S. Chamber of Commerce said on Tuesday that small businesses, which employ 46% of the U.S. workforce, rank inflation as their top concern, and their view of the economy is more pessimistic than before the war against Iran began on February 28. The group reported first-quarter survey results.

Price pressures rose further on Tuesday as President Donald Trump threatened to "obliterate Iranian civilization" if Tehran does not open the Strait of Hormuz and meet other demands by 8 p.m. Eastern Time.

Trump wrote on Truth Social: "The entire civilization will die tonight and never return. I don't want this to happen, but it very well might."

Neil Bradley, executive vice president of the Chamber, said in a statement on Tuesday that the uncertainty from the war is "clearly weighing on small business owners' confidence."

Small business confidence fell for the second consecutive quarter, with the Chamber's confidence index dropping to 67 from 68.4 in the fourth quarter, below the recent high of 72 in the third quarter of 2025.

Bradley said: "Views of the national and local economies have become more pessimistic, concerns about inflation have risen sharply, and future hiring and investment plans have clearly decreased." Meanwhile, business owners said their "operations remain stable."

Since the war began on February 28, gasoline prices have surged, unsettling both small business owners and consumers. According to AAA data, the average price per gallon of gasoline has soared about 39% since U.S. and Israeli warplanes began strikes on Iran, rising from $2.98 to $4.14.

According to New York Fed data, consumers are relatively less concerned about inflation beyond 12 months. Their median expectation for inflation three years ahead rose only 0.1 percentage point last month to 3.1%, while the expectation for inflation five years ahead remained unchanged at 3%.

The New York Fed said households' views of their current financial situation have worsened compared with a year ago, with a higher share reporting their finances have deteriorated and a lower share reporting improvement.

New York Fed data also showed that households' expectations for their financial situation over the next year have declined, with the share expecting their finances to worsen reaching the highest level since April 2025.