Consumer Inflation Expectations Fall to New Low in Fed Survey

  • New York Fed releases October survey of consumer expectations
  • Expected inflation three years ahead dips to 2.78 percent

American consumers’ expectations for inflation three years ahead fell last month to the lowest level in records going back to June 2013, according to a monthly Federal Reserve Bank of New York survey released Monday.

The median respondent to the New York Fed’s October Survey of Consumer Expectations predicted annual consumer price inflation three years from now would be 2.78 percent, down from 2.84 percent in the September poll. Median expected inflation one year ahead rebounded to 2.82 percent from a record low of 2.73 percent the month before.

The data release follows an Oct. 27-28 meeting at which Fed Chair Janet Yellen and her colleagues on the policy-setting Federal Open Market Committee decided against raising the benchmark federal funds rate from near zero, where it has been held since December 2008.

A statement released following the gathering said the committee would consider raising rates at its "next meeting" in December, with the decision depending on further labor market improvement and reasonable confidence that inflation would return to the Fed’s 2 percent target over the medium term. The statement noted "stable" survey-based measures of inflation expectations.

Speaking to reporters on Nov. 4, New York Fed President William C. Dudley said the slide in consumer inflation expectations "creates a little bit of concern."

A monthly poll conducted by the University of Michigan showed U.S. households projected annual inflation will average 2.5 percent in 5 years to 10 years from now, according to data released Oct. 30. That matches the lowest on record in data going back to 1979.

"My take is inflation expectations measured by the surveys still seem to be well-anchored, but we’re toward the bottom end of the range that we’ve been at," Dudley said last week. "So clearly if that were to move lower from here, I think it would definitely increase our level of concern."

Before it's here, it's on the Bloomberg Terminal.