Consumers are expecting inflation to remain high and their incomes to take a hit during the next 12 months, according to survey results released Monday by the Federal Reserve Bank of New York. 

The New York Fed's January 2023 Survey of Consumer Expectations showed that median inflation expectations for the year ahead held steady at 5%. Looking three years and five years out, Americans expect inflation to be 2.7% (a decrease of 0.3 percentage points) and 2.5% (an increase of 0.1 percentage points), respectively. 

Consumers' expectations about inflation are being watched closely by the Fed as it engages in a long battle to bring down high prices. Higher inflation expectations could lead to an increase in workers bargaining for higher wages which, in turn, could drive pricing upward.

The January survey showed that consumers don't expect their take-home pay to change much during the next year: Median one-year-ahead expected earnings held at 3%. It's been within the 2.8% to 3% range since September 2021. 

The biggest shift seen among survey respondents was about their household finances. The median expected growth in household income registered at 3.3% last month, a 1.3 percentage point decline from December, when those expectations hit a record high. 

While it's the largest month-on-month drop in the nearly 10 years the New York Fed has conducted the survey, the median income expectations are just below the 12-month running average of 3.5% and remain above pre-pandemic levels.

Additionally, respondents indicated they planned to slightly curtail spending — spending growth expectations fell to 5.7% from 5.9% — and also anticipated a greater chance of missing a minimum debt payment during the next three months (increased to 12.1% from 11.4%).