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Inflation Expectations

Inflation

Depending on what this new bill actually does to inflation, I can only be happy that people are still optimistic as gas prices retreat $.50 from their all time high, still much higher than two or four years ago. Survey respondent are still expecting 6.2% over the next year. As always only time will tell.

Americans’ expectations for future inflation plunged in July, at least according to one closely watched survey out this morning. That’s great news for anyone who doesn’t want current prices to become the new normal.

Driving the news: The Federal Reserve Bank of New York’s Survey of Consumer Expectations showed steep drops in how high respondents expected inflation to be across a variety of time horizons.

Why it matters: The higher people expect inflation to be, the more likely it is to materialize as businesses feel more comfortable raising prices and workers demand steeper wages.

In that sense, falling inflation expectations are a welcome sign that the high inflation of the last year is not causing a long-lasting shift in Americans’ psychology around money.

Yes, but: Inflation expectations in this survey remain far above the levels that prevailed in the years before the pandemic, and above the 2% inflation rate the Fed is targeting.

By the numbers: Survey respondents expected inflation of 6.2% over the next year, down from 6.8% in June. That was the steepest one-month drop in that number in the survey’s nine-year history.

Axios Macro By Neil Irwin and Courtenay Brown · Aug 08, 2022

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