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Inflation Expectations Sink to 2-Year Low in Fed Survey

Inflation Expectations Sink to 2-Year Low in Fed Survey
(Fintastique/Dreamstime)

Thursday, 13 June 2019 05:19 PM

U.S. consumer inflation expectations slid last month to the lowest level in two years, according to a Federal Reserve Bank of New York survey.

Households expected the U.S. inflation rate to be 2.6% three years from now, according to the median survey response published this week. Expectations have been moderating this year, following a period of several months during which they were stable near 3%.

U.S. central bankers are watching carefully for such signals because inflation has been below their 2% target throughout most of the current economic expansion, and they believe that what Americans expect is a major determinant of how fast prices actually go up. It may factor into a debate about whether interest-rate cuts will be necessary this year when Fed Chairman Jerome Powell and his colleagues meet June 18-19 to review the outlook.

Their preferred gauge of price pressures, based on personal consumption expenditures excluding food and energy, has also moderated this year -- to 1.6% in April, from 2% in December. Persistent low inflation is preventing the Fed from increasing rates, which is raising concerns about how much room it will have to cut rates in response to the next downturn in the economy.

Fed officials “must -- and do -- take seriously the risk that inflation shortfalls that persist even in a robust economy could precipitate a difficult-to-arrest downward drift in inflation expectations,” Powell told an audience of economists on June 4 at a research conference in Chicago, which was convened to study the issue.

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U.S. consumer inflation expectations slid last month to the lowest level in two years, according to a Federal Reserve Bank of New York survey.
fed, survey, inflation, expectations
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2019-19-13
Thursday, 13 June 2019 05:19 PM
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