The Fed’s worst inflation fears may be coming true as consumers lose faith in long-term prices—and even Trump supporters doubt he can bring relief
The Federal Reserve faces growing concerns over inflation as consumer sentiment declines. Recent surveys indicate rising inflation expectations, particularly among independents and Republicans, who doubt relief will come soon. This shift in consumer psychology poses risks for the economy, as higher expectations could lead to further inflationary pressures.
- ▪The University of Michigan's consumer sentiment survey shows inflation expectations rising, with year-ahead views increasing to 4.8%.
- ▪Long-run inflation expectations jumped to 3.9%, significantly above the Fed's target range for 2024.
- ▪Fed Governor Chris Waller expressed concerns that persistent inflation could alter consumer psychology and expectations.
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On the same day that Kevin Warsh was sworn in as the new Federal Reserve chairman, the University of Michigan’s consumer sentiment survey delivered a worrisome reading on inflation expectations and a major red flag for the central bank.Recommended Video In addition to the overall index falling for the third straight month to a fresh record low—even undercutting the levels seen during the 1970s oil crisis—inflation expectations rose as the Iran war and the continued closure of the Strait of Hormuz keep energy prices high. Consumers’ year-ahead views inched up to 4.8% this month from 4.7% last month, further exceeding the 3.4% reading seen in February just before the war started.
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