USA: Households expect lower inflation

“Median one-year inflation expectations fell to 5.8% in January, from 6.0% in December,” said the New York branch of the Fed.

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American households anticipated in January, and for the first time since October 2020, a slowdown in inflation within a year, according to a New York Fed survey published on Monday.

“Median one-year inflation expectations fell to 5.8% in January, from 6.0% in December”, indicates the New York branch of the American central bank (Fed), in this monthly survey on consumer expectations, carried out nationwide.

“This is the first drop in short-term inflation expectations since October 2020,” the Fed said in the statement.

In the medium term, the optimism is even greater, with the largest drop recorded since this survey began to be carried out in 2013.

“Median three-year inflation expectations fell by 0.5 percentage point to 3.5%,” the Fed said in its statement, adding that this decline concerns “all age groups, education and income.

However, inflation expectations in the short and medium term “remain elevated compared to their pre-Covid-19 levels”.

Inflation hit 7.5% year-on-year in January, its fastest pace in nearly 40 years, according to the CPI index released Thursday by the Labor Department.

The Fed, which, like many economists, had not foreseen such a rise in prices and thought that the phenomenon would not last, should begin, at its next meeting in mid-March, to raise its key rates to slow down inflation.

The president of its Saint Louis branch, James Bullard, even indicated on Monday that the credibility of the powerful institution is at stake.

It considers it necessary to raise the key rates by 100 basis points by July 1, i.e. to move them from the range of 0 to 0.25% in which they have been since March 2020, to a range of 1 to 1.25%.

However, opinions differ within the monetary policy committee, and several other officials said they were opposed to such a brutal tightening.

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