US DATA: NY Fed Consumer Survey:Longer-Term Inflation Expectations Stay Anchored
The NY Fed's Survey of Consumer Expectations showed a notable pickup in short-term inflation expectations in March - but importantly, also offered evidence that longer-term expectations remained well-anchored.
- The 1-year median expectation of 3.26% was above analysts' consensus (3.26%), marking an 18-month high and a sharp rise from 3.13% prior. But the 3Y of 3.0% was unchanged from prior and basically steady for 4 consecutive months, and the 5Y median actually ticked lower to 2.9% from 3.0% prior.
- The latter two will be very closely eyed by the Fed as it weighs whether longer-run inflation expectations are becoming de-anchored amid the ongoing tariff shock, and the answer so far is "no".
- While some FOMC members have expressed concern at the longer-run UMichigan survey numbers (4.4% in April was the highest since the early 1990s), Chair Powell has recently expressed skepticism of that metric. The NY Fed survey is seen as having a more robust methodology and we would expect the Fed to take greater signal from it.
- Another notable finding in the survey was that there is no apparent increase in consumers' inflation uncertainty despite tariffs: "Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased at one- and five-year-ahead horizons and was unchanged at the three-year-ahead horizon."
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
