Americans, as they struggle with the meaning of the Fed’s terms “transitory” and “temporary,” expect that inflation one year from now will rise to 5.7%, the 12th month in a row of relentless increases, the highest in the data going back to 2013, creating a beautiful record spike (red line), according to the New York Fed’s Survey of Consumer Expectations released today. And consumers expect inflation in three years to be at 4.2% (green line).
The Fed keeps saying in its FOMC statements that it wants “longer‑term inflation expectations” to remain “well anchored” at 2%. And they’re now totally unanchored and spiking to high heaven.
“Inflation expectations” is a key metric for the Fed, based on the theory that consumer price inflation is in part a psychological phenomenon – the inflationary mindset, as I call it. Read more…