Skip to content
Opinion
Jonathan Levin

Fed Pays Too Much Heed to 500 Random Opinions

The University of Michigan survey on consumer inflation expectations is not a great tool for time-sensitive policy decisions that could make or break the economy.

Don’t be misled.

Don’t be misled.

Photographer: Kevin Dietsch/Getty Images

The University of Michigan will publish its final data on monthly consumer inflation expectations on Friday, the first release since Federal Reserve Chair Jerome Powell declared the survey a chief factor in the decision to raise interest rates last week by the most since 1994. That will provide a fresh catalyst for violent swings in financial markets, but traders should relax their focus on the survey — and so should Powell.

Inflation expectations are self-fulfilling prophecies, and Powell is understandably concerned about them. If they rise further, workers could theoretically demand raises to offset inflationary concerns; companies could raise the prices of manufactured goods to offset higher labor costs; and the entire economy could enter a self-perpetuating inflationary spiral that may be hard to break.