The Fed keeps a close eye on several risks that could make its job of taming inflation even more difficult, such as red-hot consumer demand keeping some upward pressure on prices and the possible effects of geopolitical tensions in the Middle East on oil prices.
But the US central bank also pays close attention to whether Americans still have faith inflation will eventually return to normal. That faith seems to be eroding.
The University of Michigan’s latest consumer survey released Friday showed that Americans’ long-run inflation expectations rose to 3.2% this month, the highest level since 2011.
And those perceptions could continue to get worse the longer it takes the Fed get inflation back to its 2% target. Fed officials don’t expect inflation to reach 2% until 2026, according to their latest economic projections released in September.
If there’s one thing that would make the Fed quake in its boots, it would be worsening inflation expectations.
“If we find that consumers or businesses are really starting to feel like that long-term level of inflation …
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Submitted November 13, 2023 at 12:27AM by Ornery-Honeydewer https://ift.tt/D7gWSFo
