Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Americans’ Inflation Expectations Ease From Highest in 14 Years

Published 24/06/2022, 15:38
Updated 24/06/2022, 15:38
© Bloomberg. A shopper holds a shopping basket with groceries inside a grocery store in San Francisco, California, U.S., on Monday, May 2, 2022. U.S. inflation-adjusted consumer spending rose in March despite intense price pressures, indicating households still have solid appetites and wherewithal for shopping.

© Bloomberg. A shopper holds a shopping basket with groceries inside a grocery store in San Francisco, California, U.S., on Monday, May 2, 2022. U.S. inflation-adjusted consumer spending rose in March despite intense price pressures, indicating households still have solid appetites and wherewithal for shopping.

(Bloomberg) -- The University of Michigan’s final June reading of longer-term US consumer inflation expectations settled back from an initially reported 14-year high, potentially reducing the urgency for steeper Federal Reserve interest-rate hikes.

Respondents said they expect inflation to rise 3.1% over the next five to 10 years, down from a preliminary reading of 3.3%, according to Friday’s report. They see prices advancing 5.3% over the next year, matching the initial figure.

“Overall, the late-June reversion in long run inflation expectations was generated by growth in the share of consumers expecting extremely low inflation in the years ahead,” Joanne Hsu, director of the survey, said in a statement. “About half of these consumers expressed bleak views about the risks of recession or unemployment during the interviews.”

The inflation-expectations results earlier this month played a key role in the Fed’s decision last week to raise interest rates by the most since 1994. Chair Jerome Powell said the Michigan data, along with other recent inflation metrics, helped steer policy makers toward a 75 basis-point hike, rather than 50 basis points.

At a press conference following the move, Powell said the pickup in expectations was “quite eye-catching” and emphasized how important it is for the central bank to keep long-term inflation expectations anchored. Still, Powell acknowledged that the preliminary number could be revised.

According to the report, consumers still expressed the highest level of uncertainty over long-run inflation since 1991, though respondents were broadly certain about the direction of Fed policy.

The S&P 500 jumped Friday after the report, and two-year Treasuries rallied.

Meantime, the university’s overall sentiment index was little changed at a record-low of 50, down slightly from the preliminary June reading and the 58.4 print in the prior month.

The sharp decline reflects decades-high inflation, a slump in stock prices over the past month, and generally downbeat views on the state of the economy amid growing fears of an imminent recession. 

The gauge of current conditions lost more ground late in the month. The gauge fell to a fresh low of 53.8. The measure of future expectations improved slightly from earlier this month. Still, the index was among the lowest on record. 

Buying conditions for household durable goods also deteriorated further, with the index dropping to a fresh record low, according to the University of Michigan report. 

“Continued pessimism on both personal finances and the economy could dampen consumer spending going forward,” Hsu said.

(Updates with market reaction in the seventh pargraph.)

©2022 Bloomberg L.P.

© Bloomberg. A shopper holds a shopping basket with groceries inside a grocery store in San Francisco, California, U.S., on Monday, May 2, 2022. U.S. inflation-adjusted consumer spending rose in March despite intense price pressures, indicating households still have solid appetites and wherewithal for shopping.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.