Americans Blow Off Fed Propaganda Inflation is “Temporary”
By Wolf Richter
Americans, as they struggle with the meaning of the Fed’s terms “transitory” and “temporary,” expect that inflation one year from now will rise to 5.7%, the 12th month in a row of relentless increases, the highest in the data going back to 2013, creating a beautiful record spike (red line), according to the New York Fed’s Survey of Consumer Expectations released today. And consumers expect inflation in three years to be at 4.2% (green line).
The Fed keeps saying in its FOMC statements that it wants “longer‑term inflation expectations” to remain “well-anchored” at 2%. And they’re now totally unanchored and spiking to high heaven.
“Inflation expectations” is a key metric for the Fed, based on the theory that consumer price inflation is in part a psychological phenomenon – the inflationary mindset, as I call it.
It’s the theory that rising inflation expectations alter consumer behavior, such as by moving purchases forward before things cost even more, and accepting higher prices, rather than balking, as they would have done before. And this altered consumer behavior contributes to higher inflation in the future.
These inflation expectations are an outgrowth of reality on the ground for consumers. For the Fed, they’re adding to a war chest of reasons for hiking rates.
Inflation expectations are much higher where people spend most of their money.
Despite a median inflation expectation of 5.7%, for the line-items where consumers spend much of their money – rent, food, gas, healthcare – inflation expectations for one year from now are at or near 10%:
- Rent: +10.0% (new record)
- Food prices: +9.1% (new record)
- Gasoline prices: +9.4%
- Health care: +9.4%
- College education: +7.4%.
Expectations of rent increases one year out have been surging all year and eked out a new record in October:
Consumers expect home prices – which are not included in the Consumer Price Index, as two rent factors determine the housing component of CPI – to rise by 5.5%. This is below the peak of 6.2% in May…..
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Continue reading this article published November 8, 2021 at Wolf Street.
This article is courtesy of ThePricklyPear.org, an online voice for citizen journalists to express the principles of limited government and personal liberty to the public, to policy makers, and to political activists. Please visit ThePricklyPear.org for more great content.
