By Nathalie Voit

U.S. consumers lowered their inflation expectations in the short and medium-term, a New York Federal Reserve survey released on Feb. 14. found.

The hopeful news signals easing inflation concerns among Americans. One-year inflation expectations fell to 5.8% in January from 6.0% in December, the first decline in short-term inflation expectations since October 2020, according to the NY Fed.

Three-year inflation expectations decreased from 4.0% in December to 3.5% in January. According to the survey, the figure was the largest one-month drop since record-keeping began in 2013. The decline was broad-based and consistent across age, education, and income groups.

However, both indicators of inflation expectations remain above pre-pandemic levels as the costs of food, gas, housing, and medical care continue their upward spiral, central bank officials said on Monday.

Data released last week by the U.S. Department of Labor revealed a 7.5% jump in the Consumer Price Index over the past year, the largest annual increase since February 1982, according to the agency.

Rapidly advancing inflation has Fed officials on edge and under pressure to raise interest rates.

“I would say the committee is of a mind to raise the federal funds rate at the March meeting assuming that conditions are appropriate for doing so,” said Federal Reserve Chairman Jerome Powell at a press conference in late January, according to The Guardian. “The economy no longer needs sustained monetary policy support,” he said.

The Fed survey data was released alongside an accompanying blog post co-authored by New York Fed President John Williams on how consumers’ inflation expectations have responded to inflation during the COVID-19 pandemic.

Analyzing data from the New York Fed’s Survey of Consumer Expectations and the Michigan Survey of Consumers, researchers found that “consumers are taking less signal than before the pandemic from inflation news in updating their longer-term expectations, and that they do not view the current elevated inflation as very long-lasting.”

“While one-year-ahead and three-year-ahead expectations rose significantly during the pandemic, five-year-ahead inflation expectations have remained remarkably stable,” they said, indicating easing inflation concerns among consumers in the long-run.