Fed’s Broad-Based Inflation Expectations Index Rises to Record
2022.07.15 20:06
© Bloomberg. Jerome Powell, chairman of the US Federal Reserve, speaks during a House Financial Services Committee hearing in Washington, D.C., U.S., on Thursday, June 23, 2022. Powell gave his most explicit acknowledgment to date that steep rate hikes could tip the US economy into recession, saying one is possible and calling a soft landing
(Bloomberg) — A broad-based measure of inflation expectations that has been flagged by Federal Reserve Chairman Jerome Powell rose to a record 2.19% at the end of the second quarter from 2.17% at the end of the first, according to data published on the central bank’s website on Friday.
Developed by Fed board economists in late 2020, the index of common inflation expectations comprises more than 20 indicators measuring the attitudes of consumers, investors and professional forecasters toward future price increases.
The index has risen steadily since the end of 2020. The latest reading was the highest in records dating back to 1999.
The release of the index comes after news this morning that consumers expect inflation of 2.8% over the next five to 10 years, according to a preliminary July survey by the University of Michigan. That’s the lowest since July of last year and down from a final reading of 3.1% last month.
Consumers saw prices advancing 5.2% in the next year in the preliminary survey, versus 5.3% in June.
Powell and his colleagues are trying to rein in an inflation rate that is running more than three times their 2% target. They worry that persistent price increases could convince households and businesses that the US has entered a new era of elevated inflation and prompt them to take actions that would paradoxically help bring that about.
“The index of common inflation expectations at the board has moved up after being pretty flat for a long time, so we’re watching that, and we’re thinking, ‘This is something we need to take seriously,’” Powell told reporters on June 15 after the Fed raised interest rates by 75 basis points, the biggest increase since 1994.
©2022 Bloomberg L.P.
