Updated 20:44 IST, July 8th 2024
Fed report shows US inflation expectations softening in June
The report highlights moderately expected price gains in June for essential items like gas, food, rent, medical expenses, and college costs compared to May.

US inflation expectations: The Federal Reserve Bank of New York's latest report indicates a general easing of US inflation expectations for the coming years, driven by declining projections for price increases in a variety of consumer goods and services. The Survey of Consumer Expectations, released on Monday, shows inflation expectations one year from now at 3 per cent, down from 3.2 per cent in May. Over a three-year horizon, inflation is expected to be 2.9 per cent, slightly up from May's 2.8 per cent. Five years from now, the expectation is at 2.8 per cent, down from May’s 3 per cent.
The report highlights moderately expected price gains in June for essential items like gas, food, rent, medical expenses, and college costs compared to May. Year-ahead home price expectations also declined to 3 per cent from the previous month's 3.3 per cent.
Despite the easing price pressures, respondents anticipate future earnings growth to rise at a faster rate, while future income growth is expected to slow. Spending expectations remain elevated, consistent with levels seen before the COVID-19 pandemic.
The survey also notes a slight increase in credit accessibility challenges and a more pessimistic view of household financial situations. Respondents’ outlook on the job market remains mixed.
This New York Fed report is closely monitored for insights into public inflation expectations, particularly as central bankers assess whether inflation pressures have sufficiently moderated to justify a reduction in short-term interest rates. The Fed aims for a sustainable return to a 2 per cent inflation rate. Despite unexpectedly strong inflation data earlier in the year, recent trends suggest a cooling, which could influence the Fed's rate decisions.
The report’s findings might boost confidence among Fed policymakers that inflation is on a downward trajectory. Fed officials have consistently noted the stability of long-term inflation expectations as a positive indicator for achieving their inflation target.
“Despite the severity of the shocks, longer-term inflation expectations remained remarkably stable and close to the FOMC’s 2 per cent goal,” said New York Fed President John Williams in a recent speech. “Medium-term expectations returned to pre-pandemic levels in 2022, and short-term expectations followed suit in 2023.”
(with Reuters inputs)
Published 20:44 IST, July 8th 2024