US Inflation Expectations Declined to the Lowest Level since October 2021

US Inflation Expectations Declined to the Lowest Level since October 2021

US consumer inflation expectations declined to the lowest level since October 2021, according to a survey issued by the Federal Reserve Bank of New York on Monday.

INFLATION EXPECTATIONS

With regard to inflation, the Federal Reserve focuses more than the latest monthly figures. It also seeks to understand the expectations of American inflation.

Monthly inflation reports measure inflation now – and American prices are increasing near the highest rates in four decades. Meanwhile, inflation expectations measure how American consumers believe that inflation will be in the future.

The expectations of inflation are important because prices end up reflecting, in part, what people expect them to be. The FED monetary policy strategy must address both the causes of the historically high current inflation rates as well as the hopes and fears of the people concerning future prices.

Survey Results about Inflation Expectations

The average one-year inflation expectation declined 0.5% to 5.7% in August, from 6.2% in July, the survey revealed.

The expectation of three years of inflation dropped 0.4% from 3.2% to 2.8% -the level lowest in almost two years.

It was also reported after the survey that “consumers were more optimistic about their future household income and financial situations”.

“Hopes about the increase in prices in the future for gas also continue to decline, with households that now expect that gas prices will not change in a year from now. The expectation of home price growth drops sharply, and future credit access expectations have deteriorated, “he added.

While expectations about changes in annual prices dropped 1.4% for gas to 0.1%, they fell 0.8 % for food to 5.8%, and 0.3 % for leasing to 9.6%, According to the survey.

In the United States, consumer inflation increased by 9.1% year-on-year in June, the highest increase in 12 months since November 1981. During the following month, consumer inflation slightly dropped to a gain Annual 8.5% in July, but still hovering around a 40-year high level.

US Inflation Expectations Declined to the Lowest Level since October 2021