HomeTop U.S. NewsInflation Expectations Sink to Lowest Level in Two Years

Inflation Expectations Sink to Lowest Level in Two Years

The latest consumer sentiment survey from the University of Michigan showed that U.S. consumers are expecting inflation to be 3.1% in a year; a rapid decline from the 4.5% expected last month. This is the strongest consumer confidence exhibited since March 2021, just slightly above the 2.3% to 3% range that consumers expected two years before the pandemic.

In terms of long-run inflation, consumers expect a 2.8% reading, down from 3.2% during the previous report which was the highest level since 2011. The overall consumer sentiment index gained 13% in December; a reversal of four straight months of decline. The index was at 69.4, surpassing November’s 59.8 reading.

While the Consumer Price Index showed that consumer prices remained unchanged from October, the Personal Consumer Expenditures (PCE) index, which is the Federal Reserve’s preferred inflation gauge, showed prices increasing at their slowest pace in over two years. “While the lower inflation readings of the past few months are welcome, that progress must continue if we are to reach our 2% objective,” Fed Chair Jerome Powell stated in a speech on December 1.

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