ATFX-Federal Reserve: Short-term inflation expectations hit lowest level since 2021!

atfxThe New York Federal Reserve said that U.S. consumers' short- and long-term inflation expectations fell in July, but Fed officials have no easy task in moving towards their 2 percent inflation target.

According to a survey by the New York Federal Reserve,U.S. consumers' short-term inflation expectations fell for the fourth consecutive month in July, reaching their lowest level since April 2021.Not only that, the New York Fed said,Long-term expectations also fell in July.

Consumer expectations for one-year, three-year, and five-year inflation have all declined.The New York Fed said Monday that the median one-year inflation expectations fell to 3.5 percent in July from 3.8 percent in June, and the three-year and five-year inflation expectations fell to 2.9 percent from 3 percent, respectively.

Expectations for short-term inflation have improved across all demographic groups. Consumers say,They expect smaller price increases in the coming year for basic living expenses such as food, medical expenses, and rentInflation expectations on all these fronts have fallen to their lowest levels since at least early 2021.

The investigation found that...Households are also more optimistic about their own financial situation and the labor market.Respondents said they were less worried about job losses and less likely to believe that the unemployment rate in the United States would be higher a year from now. Respondents believe that the odds of being able to find a new job after losing their jobs have increased.

These findings are consistent with other reports.They both suggest that price pressures and consumer inflation expectations are cooling.Despite rising gasoline and grocery prices, consumer one-year inflation expectations at the University of Michigan unexpectedly fell to 3.3 percent in early August, below expectations and previous values.

In July, the core CPI, which excludes food and energy, rose 0.2% month-on-month, the smallest consecutive increase in two years.But Fed officials could face uneven progress toward achieving 2 percent inflation, with PPI growth exceeding expectations last month, for example, largely due to higher prices in some service categories.

Fed officials raised the base rate in July to its highest level in 22 years. Based on the pricing of futures contracts, it is widely expected that,The Federal Reserve will maintain interest rates unchanged at its next meeting on September 19 and 20.At that time, the latest CPI data and monthly employment report can guide their decision-making.