Inflation Expectations Before Powell's Speech: Short-Term Declines, Long-Term Upticks

The New York Federal Reserve issued data Monday that could ease investor uncertainty as they waited for key economic indicators this week and a speech from Fed Chair Jerome Powell early Tuesday.

What Happened: The Federal Reserve Bank of New York's Center for Microeconomic Data issued its December survey of consumer expectations, showing that while inflation expectations are unchanged on a three-year basis, short-term or one year inflation expectations continued to decline.

Median one-year-ahead inflation expectations fell by 0.2% to 5.0% in December, its lowest reading since July 2021. In contrast, three-year-ahead inflation expectations were unchanged in December at 3.0%

Consumer expectations for inflation on a five-year basis edged up 0.1% to 2.4%.

On a positive note, households surveyed by the Fed say the perception of their current financial situation and expectations about their future financial situation one year from now improved in December.

Why It Matters: The New York Fed data came as investors awaited the issuance of the latest consumer price index (CPI) data to be released during Thursday’s pre-market session, as well as Powell's speech, which will take place in Stockholm, Sweden.

Although the Fed chair is not anticipated to explicitly address the U.S. economy in Sweden, U.S. investors will be listening for any remarks he makes regarding inflation and how that may indicate whether the Fed will raise rates by 25 or 50 basis points at the beginning of February.

Read next: Obama-Era Economic Adviser Christina Romer Thinks Policymakers Will Face Difficult Decision Over Rate Path

Photo: Federal Reserve