According to a survey by the Federal Reserve Bank of New York, U.S. consumers dropped their inflation expectations for the next year and the next three years in July due to falling gasoline prices, raising expectations that the rapid rise in prices will cool down in the future.
The Federal Reserve Bank of New York surveys consumer expectations monthly, and the July survey showed respondents expected inflation to be 6.2% in the next year and 3.2% in the next three years. This is still a high level in history, but has dropped significantly from 6.8% and 3.6% in the June survey.
Consumers’ inflation expectations for the next five years also slipped 0.5 percentage point to 2.3 percent.
U.S. food prices rose 10.4 percent in the year to June, while consumers in July expected a 6.7 percent rise in the year ahead, 2.5 percentage points less than the June survey result in 2013, according to the Bureau of Labor Statistics. The biggest drop since June.
The same is true for gasoline, which has risen 60% over the past year, while consumers in July expected only a further 1.5% increase in the coming year, down 4.2 percentage points from the June survey and the second-largest drop since data became available.
On the home price front, consumers in July expected a further 3.5% rise in the year ahead, also down from the 4.4% forecast in June and the smallest increase since the November 2020 survey.
The US Federal Reserve (Fed) has raised interest rates sharply this year to combat the hottest inflation in more than 40 years, raising interest rates four times this year by a total of 2.25 percentage points. According to data from CME Group, interest rate futures market pricing It shows that it will rise another 3 yards (0.75%) in September.
If subsequent actual inflation data does cool, the survey could give Fed officials an opportunity to slow the pace of rate hikes.
Fed Governor Michelle Bowman said over the weekend that she doesn’t think inflation will cool any time soon and sees a need to raise interest rates further. Mary Daly, president of the Federal Reserve Bank of San Francisco, echoed her sentiments, stressing that “the rate hike is far from over.”
The Federal Reserve Bank of New York survey in July also showed that consumers expected growth in household spending to slow to 6.9% in the coming year, still historically high but down significantly from a record high of 9% in May.
in view ofS&P 500 Index July Moonlight rose 9%, the biggest monthly gain since November 2020, and consumers turned more optimistic about the stock market outlook, with 34.3% of respondents predicting a rise in the next 12 months, according to the survey.