Former Kansas City Fed President Thomas Honig responded to Jerome Powell’s statement that the Fed was not ready to start cutting interest rates “coast-to-coast.”
Americans are bracing for continued high inflation for years to come, according to a major New York Fed survey released Monday.
The median expectation is inflation rate According to the New York Fed’s Consumer Expectations Survey, prices are expected to rise 3% from the previous month in a year’s time.
According to the survey, consumers also expect inflation to remain unusually high in the coming years, with inflation expected to hover around 2.7% three years from now, up from 2.4% in January. , which is expected to rise further to 2.9% in five years.
This remains above the Fed’s 2% target, indicating that persistent inflation is likely to continue. In contrast, central bank policymakers expect inflation to fall to 2.1% by 2025 and eventually settle around 2% in 2026 in their latest economic forecasts. There is.
Chairman Powell says the Fed is in no hurry to cut interest rates until inflation is under control
A woman shops for groceries at a supermarket in Monterey Park, California, on October 19, 2022. ((Photo Credit: FREDERIC J. BROWN/AFP via Getty Images) / Getty Images)
Americans expect gasoline prices to rise slightly next year. However, they predicted that prices for other necessities, such as health care and rent, would fall next year. Consumers expect the cost of groceries to remain unchanged at 4.9%.
The research is based on a rotating panel of 1,300 households and will play a key role in determining what to do. Fed policymakers respond to inflation crisis.
The Fed’s fight against inflation is weighing heavily on middle Americans.
That’s because actual inflation depends, at least in part, on what consumers think will happen. This is a kind of self-fulfilling prophecy. If everyone expects prices to increase by his 3% for the year, that would signal to businesses that a price increase of at least 3% is possible. Workers, on the other hand, will want a 3% wage increase to offset rising costs.
Jerome Powell Fed Chairman He has repeatedly stressed that policymakers are committed to getting inflation back to the Fed’s 2% target before starting to cut rates.
A pedestrian near the Treasury Building on December 30, 2022 in Washington, DC. (Photographer: Ting Sheng/Bloomberg via Getty Images/Getty Images)
“We’re waiting for further confidence that inflation is sustained at 2%,” Powell said in testimony on Capitol Hill last week. “Once we have that confidence and we are not far from it, it would be appropriate to start lowering the restriction levels.”
The New York Fed survey also pointed to growing concerns about the labor market and household finances.
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average perceived probability losing one’s job Over the next 12 months, it rose 2.7 percentage points to 14.5%. But average jobless expectations, or the probability that the U.S. unemployment rate will be higher one year from now, fell 1.1 percentage points in February to 36.1%, the lowest in two years.
At the same time, households were more pessimistic about their ability to access credit. Perceptions of access to credit have worsened compared to the same period last year, with an increase in the proportion of households reporting that it has become difficult to obtain credit.
“Perceptions and expectations regarding credit access have become less optimistic,” the report said.
