Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
When the Federal Reserve kept rates unchanged back in November for the second meeting in a row there was still the distinct possibility that the final meeting of 2023 would provide the possibility of one more rate rise to round off the year in line with Fed policymakers dot plot forecasts of 5.6%.
The U.S. University of Michigan (UoM) survey of consumer sentiment released on Friday showed that consumer inflation expectations for the next five years declined to a five-month low of 2.8% in December, from 3.2 % in the prior month.
The data come as Federal Reserve policymakers are pushing to leave interest rates near zero. The U.S. central bank aims to keep inflation at around 2%, a level experts consider best for a healthy economy.
The UoM’s gauge of inflation expectations is an indication of whether or not Americans believe the funds they have at their disposal will go further over the next five years. This factor is essential in understanding U.S. consumer behavior, especially considering the economic recession due to the COVID-19 pandemic.
As part of the survey, consumers were asked to give an answer as to how much they expect prices to increase over the next year, three years, and five years. The data released on Friday indicated that Americans expect the consumer price index to rise by 2.5% in the next 12 months, and by 2.9% and 2.8% over the next three and five years, respectively.
The data directly contrasts with November’s readings, when inflation expectations rose to 3.2% over five years.
Overall, the UoM data indicate consumer sentiment towards inflation is declining, meaning that people are expecting prices to increase at a slower rate than in the previous month. This could be a sign of a slowdown in the economic recovery which is likely to affect consumer spending behavior in the short-term.
While the survey’s release might cause some concern for monetary policymakers, the U.S. economy is still expected to grow slowly in 2021, despite the current pandemic situation. For this reason, any decline in inflation expectations is largely expected to be temporary.