As previewed earlier, the biggest event this week - perhaps even more important than the FOMC decision at 2pm on Wednesday - is the CPI report due just a few hours before Powell takes the mic. And with so much attention falling on the latest inflation number, markets were understandably curious what the latest Inflation Expectations disclosed by the NY Fed's Consumer Survey would reveal, if only to set the stage for Wednesday's print.
Here is what the latest Survey of Consumer Expectations for the month of May revealed: inflation expectations declined at the short-term horizon, remained unchanged at the medium-term horizon, and increased at the longer-term horizon. Specifically, median inflation expectations at the one-year horizon declined to 3.2% in May from 3.3% in April, were unchanged at the three-year horizon at 2.8%, and increased at the five-year horizon to 3.0% from 2.8%.
The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at the one-year horizon, increased at the three-year horizon, and remained unchanged at the five-year horizon.
Taking a closer look, over the next year consumers expect gasoline prices to rise 4.85%; food prices to rise 5.3%; medical costs to rise 9.07%; the price of a college education to rise 8.45%; rent prices to rise 9.08%. They also expect gold to post a 4.8% increase in the next 12 months, which is amusing as that would trail all other inflation categories, and indicates that all the data point may every well be rigged by the survey organizers to present a more palatable picture.
Turning to the labor market, expectations were mixed with median one-year-ahead expected earnings growth unchanged at 2.7%, just below its 12-month trailing average of 2.8%.
Finally, turning to household finance expectations, respondents also more optimistic about their financial situation a year from now as the median expected growth in household income increased by 0.1 percentage point to 3.1%, remaining within the narrow range of 2.9% to 3.2% the series has maintained for the past year. Here are some more details:
Last but not least, the average perceived probability that U. stock prices will be higher 12 months from now increased by 1.8 percentage points to 40.5%, the highest level since May 2021. As a reference, this series previously peaked in April 2020 when stocks crashed by about 30%.
What is remarkable is that none of the survey respondents realize that one year from today is also 6 months into the next Trump admin, which is when the Fed and Congress will finally allow stock prices to crash as the catastrophic economic reality is no longer masked by various Dept of Commerce and Labor apparatchiks. In short: we would take the under.
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