US consumers’ medium-term inflation expectations fall By Reuters

(Reuters) – U.S. consumers’ medium-term inflation expectations eased substantially in July, even as their short-term and longer-term outlook for price pressures held steady, though households are increasingly worried about staying aware of their debt, said a Federal Reserve Bank of New. The York report was presented on Monday.

The three-year median inflation forecast fell to 2.3 percent from 2.9 percent in June, to the lowest since the New York Fed released its monthly Survey of Consumer Expectations in 2013. One Year Outlook and five years were steady at 3.0% and 2.8% respectively.

Fed officials – who have battled high inflation for more than two years – are watching a range of measures of inflation expectations because they worry that if they start rising substantially, consumers and businesses will change their spending behavior in ways that can make inflation. harder to tame.

Recent measures of inflation have shown it returning to the Fed’s 2% target, and the central bank is now expected to cut interest rates next month. The Fed’s policy rate – which has been raised rapidly from near zero since March 2022 – has been pegged to a range of 5.25% to -5.50% from July 2023.

Meanwhile, consumers — especially lower-income households — see a greater chance of defaulting on their debt payments in the coming year.

The survey showed a 13.3% average probability of missing the minimum debt payment, up 1 point from June and the highest since April 2020 at the start of the COVID-19 pandemic, when unemployment briefly spiked time. The increase was most pronounced for those with annual incomes below $50,000 and those without a high school diploma, the survey found.