One of the most important indicators of future inflation has started to ease in the past month, a trend that reassures the Federal Reserve in its prediction that the recent inflation surge will prove temporary.
- Inflation expectations is the signal that estimates the expectations of businesses, consumers, workers, and consumers about inflation over the next 1 to 10 years.
- The median expectation of inflation over 2022 for consumers surveyed by the University of Michigan increased to 4.8% in July, the highest since August 2008.
- The consumers’ one-year expectations are largely influenced by today’s inflation rate, which stands at 5.4%, a 13-year high.
- Business inflation expectations have also declined, according to a survey of 300 businesses in six states by the Federal Reserve Bank of Atlanta. Companies expected 2.8% inflation a year from now in early July.
Some economists are concerned that inflation expectations could rise steadily. Trillions of dollars in federal pandemic relief and household savings have helped to boost demand.
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Source: The Wall Street Journal.
