Fed Survey Shows July Inflation Expectations Lowest Since Marchby
Expected inflation among people under 60 falls to record low
Consumers expect household income and spending to grow faster
American consumers tempered their outlook for inflation last month as a gauge of expectations declined to near the lowest level since the series began in 2013, according to a survey by the Federal Reserve Bank of New York.
The median response of roughly 1,200 people taking part in the national survey showed an expected inflation rate three years ahead of 2.5 percent in July, down from the 10-month high of 2.86 percent recorded in June, the New York Fed said Monday.
The measure, which many U.S. central bankers watch closely because they believe expectations are the most important determinant of actual inflation, matched the reading in March and was slightly above 2.45 percent in January that marked the lowest on record in the survey’s three-year history.
“Low longer-term inflation expectations, if allowed to become entrenched, would act as a restraint on actual inflation making it more difficult for us to meet our inflation objective,” New York Fed President William Dudley said in a July 31 speech.
A demographic breakdown of the results showed the decline was broad-based across groups based on age, income, and educational attainment. Expected inflation three years ahead among consumers ages 60 and under fell to record lows.
Survey respondents also reported higher expected growth in household income and spending over the coming year. The proportion who expect to be financially better off in a year increased 3.1 percentage points to 36.2 percent.