A new survey from the Federal Reserve indicates that companies across the U.S. foresee inflation remaining low this year, with corporate stock price expectations hitting their lowest mark since before the inflation surge of 2022.
The Cleveland Fed’s latest survey on business inflation expectations, released Tuesday, shows that only 3.1% of businesses anticipate a rise in general inflation over the next year, a decrease from last year’s peak of 3.9%. During President Joe Biden’s initial term, expectations for the following year were above 7%.
At the same time, businesses expect their unit prices to grow by just 2.0% in the coming year, down from 2.8% at the start of 2025, as per the Atlanta Fed’s Survey of Business Inflation Expectations. These figures are approaching levels seen before inflation began to rise sharply in 2022, indicating that businesses might think the worst of price pressures are behind them. This observation aligns with how corporations are behaving—large businesses are shifting their focus more toward affordability than on widening profit margins. For instance, PepsiCo, the food and beverage giant with a valuation of $29.3 billion, recently announced plans to lower prices on popular snacks like Cheetos and Doritos, following “extensive consumer feedback” around affordability challenges. “Some consumers are looking to us for a reason to step into this category,” said PepsiCo CEO Ramon Laguarta, emphasizing that affordability has become the “biggest friction” for those in lower and middle-income brackets.
This change in focus contrasts sharply with recent years, when companies routinely passed on increased input costs to consumers via price hikes. In fact, PepsiCo raised prices by double-digit percentages in both 2022 and 2023, but they toned down these increases in response to growing pushback from consumers.
According to the Federal Reserve’s analysis, this trend is prevalent across the economy. A Cleveland Fed study, which has been analyzing business sentiment since 2018, reveals not only a decline in inflation expectations but also reduced uncertainty around these expectations. The standard deviation of responses in the Cleveland survey dropped to just 0.7 percentage points in the first quarter of 2026, the lowest point in a recent set of data, indicating that firms are growing more confident in their belief that pricing pressures are manageable. Companies are utilizing various strategies to retain market share while handling cost pressures. Some are choosing to absorb increased input costs through slimmer profit margins instead of passing them onto consumers, while others are rethinking their product designs and packaging to ensure affordability.
The Atlanta Fed’s survey, which gauges expectations for companies’ own unit costs rather than general inflation, has shown a significant decline in recent months. The anticipated 2.0% rise for next year stands in stark contrast to the projected 5% during the peak inflation phase of 2022-2023. This moderate outlook signifies easing supply chain issues and a growing recognition among businesses that consumers are increasingly sensitive to prices. Declining sales volumes in major consumer goods sectors are prompting a strategic pivot toward accessibility rather than premium pricing.
The Fed’s research presents a comprehensive view of business conditions that extends beyond individual company statements. Surveys from both the Cleveland and Atlanta Feds involve discussions with hundreds of companies across various industries, providing a wider lens on inflation expectations compared to singular company earnings reports or investor presentations. For policymakers, declining business expectations might lend further support to the notion that inflationary pressures are diminishing, especially as firms encounter consumer pushback against higher prices alongside competitive pressure to keep costs low.
Moreover, this study challenges the belief that tariffs from the Trump administration will lead to price increases this year. Many economists had anticipated that tariffs would drive consumer prices up; however, the index for core consumer goods, typically more sensitive to inflation, only rose by 1.1% over the year ending in January. Research indicates that higher tariffs have historically been linked to lower inflation.
John Cochran, an economist at the Hoover Institution, suggested that boosting government fiscal support could help lower inflation by enhancing fiscal capacity or increasing expected revenues relative to expenditures. The tariffs from President Trump have reportedly led to enormous profits, amounting to hundreds of billions of dollars, projected to average in the low hundreds of billions annually over the next decade, based on current policy forecasts (with total tariffs from 2026 to 2036 approximating $4 trillion). In this context, the fiscal benefits stemming from these tariffs may lead to lower inflation than would otherwise occur, potentially driving the overall price level down compared to a no-tariff scenario.
