While the hotter-than-expected inflation reading for August is a major setback in America’s fight against surging prices, it came at a time when optimism was slowly building among Americans. According to the latest Survey of Consumer Expectations, a monthly report from the Federal Reserve Bank of New York, Americans’ inflation expectations declined significantly in August, marking the second consecutive month of lower inflation expectations after a smaller decline in July.
In August, the median expected inflation rate one year ahead was 5.8 percent, down from a peak of 6.8 percent in June. Looking ahead three years, the median expected inflation rate was 2.8 percent in August, down from 3.9 percent in May. The latest inflation reading, which topped expectations, could put a dampener on that new sense of optimism among Americans. On the other hand, the Fed is now all but certain to take further aggressive action, potentially bringing down inflation quicker in the long run.
This chart shows the median expected inflation rate one year and three years ahead according to U.S. consumers.
