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Former Dallas Fed Danielle DiMartino Booth and Natixis Chief Economist Joseph Lavorgna for the Americas discuss recently released Fed minutes and inflation fears.
Americans’ inflation fears peaked in June, reaching their highest level since June 2013 as consumer goods prices continued to climb, according to a Federal Reserve Bank of New York survey released Monday.
The median expectation is that the inflation rate will be up 4.8% in one year, a new high for the gauge, and up 3.6% in three years, the highest level since August 2013 , according to the New York Federal Reserve’s Survey of Consumer Expectations.
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Americans also expect home prices to continue rising, with year-over-year expectations unchanged at 6.2% in June, which is significantly higher than the previous year average of 3.7%. . Still, consumers said they expected the price of things like food and gas to drop slightly, while expectations for college tuition hit 7% – the highest reading since April 2019.
Fed Chairman Jerome Powell has mainly downplayed the rise in prices for goods and services, attributing the increase to widespread bottlenecks that have severely disrupted the supply chain and a pent-up wave of demand among consumers. who have plenty of cash. Although he said inflation could turn out to be “higher and more persistent than expected,” Powell maintained that it is likely transient.
CONSUMER PRICES UP 5% PER YEAR, HIGHER SINCE AUGUST 2008
US central bank policymakers are wondering how to handle deeply conflicting economic data: As inflation soars, in May the government announced that consumer prices for goods and services rose 5% in May. compared to the previous year, the fastest year-over-year jump since 2008 – job growth has been slower. There are still some 9.5 million Americans unemployed.
During their two-day policy-making meeting in June, Fed officials voted unanimously to keep interest rates near zero, where they have been sitting since March 2020, and pledged continue to buy $ 120 billion in bonds each month.
The Fed gave no sign in June that it was imminently considering cutting its aggressive bond buying program, even as policymakers raised headline inflation expectations to 3.4% for 2021 – a more than the forecast for March. Minutes from their June 15-16 meeting revealed officials discussed how and when to start unwinding their support, but most policymakers reiterated they were not ready to begin. to withdraw their asset purchases.
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The New York Fed survey is based on respondents from approximately 1,300 households.
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