US Federal Reserve Reveals Key Data Suggests Deceleration In Inflation By Investing.com

Investing.com – Consumers are becoming more confident that inflation will not be a major problem in the coming years, according to the July inflation forecast report released in New York on Monday, which showed that three-year expectations continue to decline.

The latest comments from the monthly Survey of Consumer Expectations indicate that respondents see inflation remaining high over the next year and then declining over the next two years after that.

In fact, the three-year portion of the survey showed that consumers expect inflation to be just 2.3%, down 0.6 percentage points from the June survey.

The results come as investors worry about inflation rates and whether the Federal Reserve will be able to cut rates as soon as next month. Economists believe that expectations are key to reducing inflation, as consumers and business owners will change their behavior if they believe that prices and labor costs are likely to continue to rise.

On Wednesday, the US Labor Department plans to release monthly data on inflation, which is expected to show a 0.2% increase in July and an annual rate of 3%, according to estimates. This is still a full percentage point away from the Fed’s 2% target.

Markets have fully priced in the possibility of cutting interest rates by at least a quarter of a percentage point in September, and a strong possibility that the Fed will make a full percentage cut before the end of the year.

Good news about inflation

On the other hand, although medium-term expectations improved, inflation expectations over one and five-year horizons remained unchanged at 3% and 2.8%, respectively.

However, there was some other good inflation-related news in the survey.

Respondents expect the price of gas to rise 3.5% over the next year, 0.8 percentage point lower than in the June survey, and for food to increase 4.7%, 0.1 percentage point lower than last month .

In addition, housing spending is expected to increase 4.9%, which is 0.2 percentage points lower than the June survey, and the lowest reading since April 2021, around the same time the current inflationary increase began.

On the other hand, expectations for medical care, college education, and rental costs rose.

Employment prospects improved, despite a high unemployment rate. The probability of losing one’s job in the next year fell to 14.3%, a decrease of half a percentage point, and expectations of leaving one’s job voluntarily, which represents worker confidence, rose in the opportunities available in the labor market, to 20.7%, an increase of 0.2 percentage points to the highest level since February 2023.