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A Big Decline in Inflation Expectations
The Expected Impact on American Consumer Behavior
Recent surveys from the New York Federal Reserve and the University of Michigan have revealed a significant drop in inflation expectations, a development that could impact American consumer behavior as we move into 2024.
The November New York Fed Survey of Consumer Expectations indicated that year-ahead inflation expectations decreased to 3.4%, a notable decline from October's 3.6% and the lowest reading since April 2021. A time when inflation concerns hadn’t boiled over yet.
Probability of Different Inflation Outcomes: One-Year Ahead
This trend that we’re seeing from the data that the New York Fed is gathering mirrors the substantial drop in one-year inflation expectations reported in the December University of Michigan consumer sentiment survey. Telling us that two widely respected surveys are giving us a sense of a seismic shift from how consumers perceive prices moving forward.
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