- New York Fed
US consumers' expectations for inflation fell in March following a rebound from record lows in the prior month, adding to the uncertainty over how quickly the Fed can proceed with interest rate increases in the coming months. According to the Federal Reserve Bank of New York, expectations for inflation one year in the future declined to 2.53% in March, down from 2.71% in February. That was the fourth drop in the last six months and put expected inflation at just over a tenth of a percentage point above January's reading of 2.42%, the lowest level since the survey began in mid-2013. Moreover, the survey of consumer expectations predicted inflation to be 2.5% three years from now, compared with 2.6% in February. In January, expected inflation three years ahead was 2.45%, marking the lowest level since June 2013.
The Fed views inflation expectations as important information of where inflation is headed and also a reading on the credibility of its 2% inflation target. The Fed supposes too-low inflation has a sign the US economy is not firing on all cylinders and at risk of slowing. The personal consumption expenditure index, the Fed's preferred inflation gauge, climbed just 1% in the 12 months ended in February, down from 1.2% in the prior month. Inflation has been below the Fed's 2% goal since April 2012.
© Dukascopy Bank SA