Photographer: Victor J. Blue/Bloomberg

Expected Inflation Falls Close to Record Low, Fed Survey Shows

  • Data point may add to concerns about soft inflation readings
  • Results jibe with University of Michigan consumer survey data

U.S. consumer inflation expectations declined last month to near the lowest levels in the four-year history of a survey conducted by the Federal Reserve Bank of New York.

The median respondent to the May survey of consumers reported an expected inflation rate of 2.47 percent three years from now, down from 2.91 percent in April and just above the 2.45 percent low recorded in January 2016 in a series that goes back to 2013.

The data may add to concerns over a recent decline in U.S. inflation, which has led investors to take a skeptical view toward additional Fed interest-rate increases. The U.S. central bank’s Federal Open Market Committee is widely expected to vote on a rate hike when it concludes a two-day gathering in Washington on Wednesday, but market odds on increases at their meetings in September and December are only about one in four a piece, according to the prices of federal funds futures contracts.

Unexpected weakness in U.S. consumer prices showed a core measure of inflation that Fed officials watch closely slowed to 1.5 percent in April from 1.8 percent in February, leading some policy makers and analysts to question whether inflation is still on track to rise to the Fed’s 2 percent target.

The New York Fed survey results jibe with those of another prominent survey conducted by the University of Michigan, which also found U.S. consumers’ long-term inflation expectations in May were just above a record low.

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