- Median inflation expectations slightly faded by 0.1 % on the one-year and three-year range in May
- Median one-year-ahead earnings expectations rose to 2.5% from 2.4% in April.
- “No signs of a recession” in the U.S. economy – Mnuchin
Consumer expectations survey
In a recent survey of consumer expectations by the Fed, we can see that the US consumer expects modest declines in not only household finances, but inflation – while recognizing the labor market stable.
The Fed asks a large pool of people about their outlook on three core measures: inflation expectation, labor market expectations & household finances.
They ask them approximately one-year from now, & three years from now.
The core findings from the Fed are as followed:
“The May survey shows median inflation expectations declined by 0.1 percentage point at both the one- and three-year horizons, to 2.5 percent and 2.6 percent, respectively, again marking their lowest readings since late 2017.
The declines were broad-based across income and age groups. Home price change expectations remained subdued at their new low level of 3.0 percent.
Households were generally less positive about their current and future financial situation, even though their average expectations for earnings growth and finding a job improved.” – Source Fed
Inflation over the coming year has been assumed to be worse than the coming next three years. This could be due to the ongoing “trade war” with China. The public sees this as an issue that will eventually drive up costs as many products from China.
Survey contributors expect labor markets to remain healthy
People surveyed appeared optimistic about the ease of finding a job in the current market. Given the current U.S. unemployment figures sitting at 3.6%, implying that it is an employee’s market rather than employers, this gives the employee more of an advantage, and we tend to see wages grow more aggressively during an employer’s market.
Rate cuts ahead
The Fed is exhibiting signs that they are about to cut rates to get inflation back to a point where it shows growth. The Trump administration would welcome any rate cuts from the Fed. The U.S. president recently said “the Federal Reserve’s rate hike in December was a “big mistake” because it gave the Chinese an advantage during trade negotiations, Trump said during a phone interview on CNBC.
CNBC also noted “Treasury Secretary Mnuchin tells CNBC he believes the U.S. bond markets are indicating “a lowering of interest rates.” See the full video & Read the full article here.