Aug 8, 2022 1 min read

Inflation Expectations Looking Peakish

Inflation Expectations Looking Peakish

July's survey of consumer expectations (SCE), conducted by the Federal Reserve Bank of NY, had some good news for Fed Chair Jerome Powell and the financial markets too:

(1) Median one- and three-year-ahead inflation expectations both declined sharply in July, from 6.8% and 3.6% in June to 6.2% and 3.2%, respectively. The press release noted: "Both decreases were broad-based across income groups, but largest among respondents with annual household incomes under $50,000 and respondents with no more than a high school education."

(2) In addition, median five-year ahead inflation expectations, which have been elicited in the monthly SCE core survey on an ad-hoc basis since the beginning of this year, also declined to 2.3% from 2.8% in June. Especially encouraging is that expectations about year-ahead price increases for gas and food fell sharply.

(3) While the FRB-NY data suggest that inflationary expectations might have peaked, the Conference Board's consumer survey shows that 12-months ahead inflation expectations remained elevated at 7.6% during July.

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