Inflation Expectations

Inflation Expectations Cool The New York Fed released its June survey for Inflation Expectations on Monday. According to the release, consumers expect to see prices increase at a 3% annual rate over the next year, down from 3.2% in May's survey. Expectations for rising home prices over the next year fell to 3% from 3.3%, which is roughly where the trailing twelve-month average is for that item. Additionally, the median expectation for annual inflation over the next three years increased to 2.9% from 2.8%, but the median expectation for annual inflation over the next five years dropped to 2.8% from 3%. This is generally positive news as it shows an anchoring or re-anchoring of consumer inflation expectations. The unfortunate part of all of this is that these expectations have anchored well above where the Fed is trying to take inflation and in regard to inflation, there is always the fear of self-fulfilling prophecy. The next report on these expectations will land on Friday morning in the University of Michigan's preliminary July report on Consumer Sentiment. For June, this survey showed 3% inflation expectations over both one year and five-year windows.