Time is running out for more than a million Americans to collect refunds from the IRS and a Federal Reserve Bank of New York survey reveals a key prediction about inflation.
Typically, the IRS charges individuals who file returns late without an extension a failure-to-file penalty – an extra 5% per month on the unpaid amount, which can add up to 25% of the tax due. But the tax-collecting agency is waiving that fee for many individuals and businesses who filed returns for 2019 and 2020 late.
The median expectation is that the inflation rate will be up 5.7% one year from now, a marked decline from 6.2% recorded in June, according to the New York Federal Reserve's Survey of Consumer Expectations. Three years from now, consumers see inflation cooling off slightly to 2.8% – down from the 3.2% recorded last month.
The survey plays a critical role in determining how Fed policymakers respond to the inflation crisis. That is because actual inflation depends, at least in part, on what consumers think it will be. It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs.
On a year-over-year basis expect prices to climb 8.1% in August, easing back from July’s cooler-than-expected reading of 8.5% and June’s 9.1% surge, the highest inflation rate in almost 41 years . Factoring out volatile food and energy costs, the core consumer price index is anticipated to rise 0.3% in August, matching July’s increase.