Consumers' expectations of inflation have appeared at the highest levels for more than a year, threatening to become unanal following strong economic performance in recent months.
According to the University of Michigan Consumer Sentiment Survey released Friday, inflation expectations rose from 3.3% in January to 4.3% in the previous year.
Pollers said it was the best reading since November 2023 and constituted “an extraordinarily large increase for the second consecutive month.”
“This is the fifth and fifth time in 14 years, and we've seen such a big month's rise (over 1 percentage point) in the hopes of inflation that are ahead of the year,” research director Joanne HSU said. I mentioned it in the commentary.
Consumer sentiment in the survey has declined for the second consecutive month, falling by about 5% to reach its lowest level since last July.
Long-term consumer inflation expectations rose to 3.3% this month, compared to 3.2% last month. The Federal Reserve's long-term forecast for inflation in the Personal Consumption Expense (PCE) price index is 2%.
This increase follows a three-month increase in the consumer price index (CPI).
CPI increased in October, November and December, up 2.9% from an annual increase of 2.4% in the fourth quarter.
The Fed began interest rate cuts in September after the job market flashed warning signs in the summer, and inflation appeared to have fallen to 2% after hitting a 9% high in 2022.
Emissions over the past few years have been attributed to rewinding supply shocks and absorption of trillions of stimuli into the economy, but economists are trying to maintain the expectations of consumers who are fully chopped with inflation. and other central bank roles.
“Monetary policy played an important role…by fixing inflation expectations and avoiding repeated harmful wage prices spirals and the tragic inflation experience of the 1970s,” the International Financial Fund economist said in October. It is stated in.
At the latest meeting of the Rate Setting Committee, the Fed has suspended its rate cuts and expects it will only make two-half cuts this year.
Economists saw strong pay, wage and labor data strengthen the possibility of suspension in their January employment report.
“Job market data is likely to hold off the Fed on further interest rate cuts,” said Mike Fratantoni, economist with the Mortgage Banks Association, in the commentary. “With inflation still exceeding its target and there are no significant indications of weakening in the job market, the MBA's forecast is that the Fed will cut this cycle by up to one.”
