US 1-Year Expected Inflation at 5.2%... Lowest Since August Last Year

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Inflation expectations of U.S. consumers for the next year have significantly slowed, marking the lowest level since August last year. As the Federal Reserve's (Fed) aggressive interest rate hikes throughout this year have led to confirmation of a peak in inflation according to recent indicators, inflation expectations have also declined.

The Federal Reserve Bank of New York announced on the 12th (local time) that the expected inflation rate for the next year, according to the November consumer outlook survey, was 5.2%. This is a 0.7 percentage point decrease from the previous month and the lowest level since August last year.

Inflation expectations for the next three years also slowed to 3.0%, down from 3.1% the previous month. The five-year inflation expectation forecast also dropped by 0.1 percentage points to 2.3%.

By item, inflationary pressures eased mainly on food and gasoline, confirming a downward trend in overall expectations. In the November survey, respondents expected food and gasoline prices to rise by 8.3% and 4.7%, respectively, over the next year. Although these levels still exceed the Fed's inflation target of 2%, they are 0.8 and 0.6 percentage points lower than the previous month's forecasts, respectively.

Housing prices one year from now are expected to increase by 1.0%, which is 1.0 percentage point lower than the previous month's forecast. This is the lowest level since May 2020. Additionally, wages are expected to rise by 2.8%, and household income by 4.5%.

This survey was released ahead of the December Federal Open Market Committee (FOMC) meeting, where the Fed's final interest rate decision of the year will be made. Having maintained aggressive tightening to curb inflation throughout this year, the Fed is widely expected to slow the pace by raising rates by 0.5 percentage points instead of 0.75 percentage points at the December 13-14 FOMC meeting. This is considered almost certain.

Before the rate decision, the U.S. Consumer Price Index (CPI) for November, to be released on the 13th, is forecasted to show a 7.3% year-over-year increase, indicating a slowdown in the rate of increase compared to October.

This content was produced with the assistance of AI translation services.