Inflation Expectations Dwindle Among Services Firms, Fed Finds

Some unwelcome news for U.S. central bankers from a Federal Reserve Bank of Philadelphia survey: Businesses appear to be joining consumers and investors in reducing their inflation expectations.

Service providers in the Philadelphia Fed’s district expect to raise prices 2 percent over the coming year, down from 2.2 percent when the question was last asked in August, according to the median response in results published Tuesday.

The reduced expectations may have something to do with what appears to be eroding pricing power. Over the last 12 months, the net percentage of firms reporting increases in prices received for their products was just 8.9 percent on average, the lowest in four years. That’s despite an uptick in the net percentage of firms reporting higher prices paid over the same period -- to 20.6 percent on average, the highest since 2013.

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