The U.S. consumer may not fear inflation — at least, not yet — but there is a sense of unease as to where prices may be headed.
Reuters reported on Monday (May 9) that inflation expectations, as measured by the New York Fed’s April survey of U.S. shoppers, showed that the overall expectations of price gains — looking one year out — was up by 2.6 percent. That was 10 basis points higher than was seen in March. Not a big leap of concern, and yet, the three-year, longer-term horizon has leapt up a bit, at 2.8 percent, the highest level that has been seen in five months. Despite the jump in the longer-term reading, Reuters noted that the overall gauge is at levels close to its nadir in the three years the survey has been in existence.
Median inflation expectations have shown some growth as uncertainty, said the newswire, has “jumped sharply.” However, the bigger picture may show that the Fed may be wise in holding off on big boosts to interest rates as the measures are still relatively and historically low as a measure of the sentiment held by more than 1,200 U.S. households. The vigilance over interest rates shows a high-wire balance act as increasing rates too fast might choke off consumer spending, which is widely held to be one of the key drivers of the economy.
Separately, in an interview with The New York Times that ran over the weekend, William C. Dudley, president of the Federal Reserve Bank of New York, said that he sees growth on the horizon for the U.S. economy, with an eye on raising rates twice through the next year, which remains a “reasonable expectation” for rates overall.