Business Maverick: Consumers’ US Inflation Expectations Drop Across All Time Horizons

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Consumer expectations for US inflation over the coming years declined sharply in the latest survey by the Federal Reserve Bank of New York, a finding that may ease the Fed’s concern about ever-rising prices getting baked-in to household behavior.

Expectations for US inflation three years ahead fell to 3.2% in July, from 3.6% the previous month, according to the New York Fed’s Survey of Consumer Expectations. It was the second straight monthly drop. The outlook for inflation in the coming year fell to 6.2% from 6.8%.

The Fed, which is seeking to rein in prices via higher rates without tipping the economy into recession, says there’s a risk that rising prices will lead American households to anticipate more of the same in the future — an expectation that could prove self-fulfilling.The drop in gasoline prices over recent weeks played a big part in easing household concerns. The New York Fed survey found that consumers now expect gasoline to rise by just 1.

Still, almost all inflation measures are running well above the Fed’s 2% target, even if there were some signs of a slowdown last month.

 

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