Across The Pond - Rising Inflation Expectations Pose A New Threat To Fed Efforts

21st October 2022

eep within Friday's University of Michigan (UMich) numbers was a worrisome sign for the Federal Reserve's inflation-fighting efforts. While the focus of the UMich releases tends to be on their consumer and current conditions surveys, another of their reports suggests an entrenching of inflation expectations both over one- and five-to-ten-year periods. The University of Michigan one-year inflation expectations (median) surged to 5.1 percent from 4.7 percent, the first increase since March 2022, when energy prices surged. For the five-to-ten-year survey, consumer inflation expectations rose from 2.7 percent to 2.9 percent.

It is likely that the recent upsurge in the average US price of a gallon of gasoline, from $4.29 per gallon in mid-September to over $4.50 more recently, accounts for at least some of those mounting expectations. Other areas in which month-to-month price increases were observed in September were food (up 0.8 percent), transportation services (up 1.9 percent), and shelter (up 0.7 percent).

Note
The UK seems to be following the US interest rate increases and may be of interest to note how consumers may be affected.
This article can be found at the American Institute for Economic Research. To read the full article go HERE

The Fed Res meets again at the beginning of November and the Bank of England on 3 November 2022 when another rise in the UK interest rate looks likely.