Business Inflation Expectations Show No Sign of Tariff Price Pressure Photo by Chris Unger/Zuffa LLC

One of the most important signals of future inflation suggests that businesses do not expect increased tariffs to increase costs.

Business inflation expectations were unchanged at 2.2 percent in November, according to the Federal Reserve Bank of Atlanta’s monthly survey of around 640 businesses in six states. That is lower than the 2.4 percent inflation expected a year ago.

The survey asks businesses to forecast their own costs rather than the prices they charge. Tariffs are levied on imports and directly paid by companies that import goods but may be offset by changes in the value of the dollar compared with foreign currencies. When President Donald Trump imposed tariffs on some imports from China during his first term, the dollar rose against China’s currency, largely eliminating any increased costs to importers.

Year-ahead unit cost expectations have fallen considerably since hitting a peak of 3.8 percent in April 2022. They remain somewhat elevated relative to their prepandemic average of 2.0 percent

Firms reported a median 3.0 percent price increase over the past 12 months. The median expectation for prices over the next year is the same 3.0 percent. This is down from the August expectation of 4.0 percent and a realized price increase of 5.0 percent.

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