The Federal Reserve: Short-term inflation expectations of US consumers hit a new low since 2021.

The survey released by the New York Fed on Monday showed that the one-year short-term inflation expectations of US consumers in July fell from 3.8% to 3.5%, reaching a new low since April 2021, marking the fourth consecutive month of decline. Expectations for three-year and five-year inflation also declined, both dropping from 3% to 2.9%.

The improvement in short-term inflation expectations mentioned above is widespread among different population groups. Consumers expect smaller price increases in categories such as gasoline, food, medical expenses, college tuition, and rent next year, with inflation expectations for many specific items falling to the lowest levels since early 2021.

Specifically, consumers expect gasoline prices to rise by 4.52% next year, food prices to rise by 5.17%, medical expenses to rise by 8.41%, college education prices to rise by 8.01%, and rent prices to rise by 9.01%, reaching the lowest level since January 2021. Expectations for housing price increases have also declined from 2.9% in June to 2.8% in July.

The survey also shows that households have a more optimistic assessment of their financial situation. Compared to a year ago, more respondents give positive evaluations of their personal financial situation, while fewer respondents give negative evaluations. Those who expect their lives to improve in a year have reached the highest level since September 2021. The proportion of consumers who expect to be unable to repay their minimum debt in the next three months has decreased from 11.99% in June to 11.68% in July.

The survey also shows that people's expectations for the overall labor market outlook have improved compared to June. Respondents stated that their concerns about unemployment have eased, and they believe that the possibility of a higher US unemployment rate in a year has also decreased. People believe that the likelihood of finding a new job after unemployment has increased.

The results of this survey by the New York Fed are generally similar to those of the previously released University of Michigan Consumer Survey. According to data from last Friday, the initial value of the one-year short-term inflation expectations of the University of Michigan in August unexpectedly fell to 3.3%, tying the lowest level in over two years. Long-term inflation expectations have also fallen, from 3% to 2.9%. Consumers' views on their future financial situation have reached the highest level in two years.

Last week, the US released two major data points: CPI and PPI for June. The US CPI in July stopped its 12-month consecutive increase, rising 3.2% year-on-year, and the core CPI recorded the smallest consecutive increase in over two years, with moderate price pressures remaining on a month-on-month basis. The year-on-year growth rate of US PPI in July accelerated from the revised 0.1% in June to 0.8%, higher than the expected 0.7%; the core PPI rose 2.4% year-on-year, higher than the expected 2.3%, and the same as June. Analysis suggests that the Federal Reserve's survey report indicates a slowdown in inflation expectations, which raises questions about whether the Fed needs to raise interest rates again. It is expected that inflation will become more moderate, which may be seen as a positive impact on the inflation outlook, as Fed policymakers believe that expected inflation paths strongly influence actual inflation.

However, the market expects the Fed's anti-inflation path to be bumpy. A key inflation expectation indicator in the United States recently approached the 9-year peak set in April last year, which means that, in the eyes of many professional investors, inflation stickiness in Europe and the United States may be significant, making it not easy to bring inflation back to the 2% target.