US short-term inflation expectations at two-year lows

Consumers are increasingly optimistic that inflation is coming down, according to a survey released yesterday by the New York Fed.

The New York Fed’s May Survey of Consumer Expectations showed Americans’ one-year inflation expectations fell 0.3 percentage points to 4.1 percent. Consequently, the inflation expectation for the next 12 months in the US fell to the lowest level since May 2021.

INCREASED LONG-TERM EXPECTATIONS

Price increases are still above the Fed’s 2 percent inflation target, according to the survey. On the other hand, long-term median inflation expectations also increased. The participants raised their inflation expectations in the next three years from 2.9 percent to 3.0 percent. The 5-year inflation expectation also increased from 2.6 percent to 2.7 percent.

According to the survey, salary expectations have also decreased. Expected one-year earnings growth fell 0.2 percentage point from April to 2.8 percent, in line with the broad range since September 2021.