American consumers’ long-term inflation expectations rose to a 12-year high due to growing concerns about borrowing costs and uncertainty about the future of the economy, according to new data from the University of Michigan.
Consumers expect prices to rise at an annual rate of 3.2% over the next five to 10 years, up from 3% the previous month, according to the university’s preliminary November findings obtained by The Post.
Americans surveyed expect costs to rise 4.4% over the next 12 months, up from an expectation of 4.2% the previous month, according to the report released Friday.
“The combination of persistently high price expectations, high borrowing costs and labor market weakness does not bode well for the prospects for continued strength in consumer spending and economic growth,” said Joanne Hsu, director of the survey. he told Bloomberg on Friday.
On Thursday, Federal Reserve Chair Jerome Powell reiterated that the central bank is willing to raise interest rates further if necessary to curb inflation, surprisingly hawkish comments that sent the S&P 500 down 0.8 % after eight consecutive days of gains.
“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” Powell said.
Separately, on Friday, debt rating agency Moody’s cut its outlook on the U.S. government from “stable” to “negative,” citing large fiscal deficits, political polarization and a decline in debt affordability.
The move by Moody’s – the last major US credit rating agency to maintain a top rating for the US government – follows a downgrade by Fitch earlier this year, after months of wrangling in Washington on the US debt ceiling.
Friday’s rise in consumer inflation fears was attributed to expectations that gasoline prices will rise in the short and long term, even though pump price increases have been slowing in the last months.
The gasoline index was blamed for most of the 3.7% year-over-year increase in September’s consumer price index.
Last month’s CPI, the most widely used inflation measure that tracks the overall change in goods and services, showed the gasoline index rose 2.1%, although it was a marked slowdown from the 10.6% rise. August, when AAA figures showed that the average. The price of a gallon of gasoline was $3.85.
As of Thursday, a gallon of gasoline in the US averages $3.39, according to AAA.
October CPI figures will be published on Tuesday.
Meanwhile, one in five consumers surveyed by the University of Michigan said unemployment rates will keep inflation stubbornly high over the next year.
The October jobs report showed that the unemployment rate for the US economy stood at 3.9%, which continues to exceed expectations given the rapid rise in interest rates, which are currently in an unseen range since 2001: between 5.25% and 5.5%.
October’s higher unemployment figure, which is slightly above the 3.8% rate that was stable in August and September, which had risen from 3.5% in July, indicates a higher likelihood of a recession by the end of the year, according to historical data, according to Bloomberg. economists.
Central bankers have also repeatedly warned that continued economic growth, coupled with robust consumer spending, will leave them no choice but to raise interest rates again.
Therefore, when last month’s core personal consumption expenditure (PCE) price index rose 0.3% in September, it signaled that US consumers could face another rate hike following the upcoming US monetary policy meeting. the Federal Reserve in mid-December.
And while core prices continued to rise (a key indicator used by the Federal Reserve to measure the rate of inflation that excludes volatile food and energy costs), so did inflation-adjusted consumer spending, which rose 0.4% in September, according to federal data.
However, Federal Reserve officials have ruled out the possibility of the US economy falling into a recession, citing its aggressive tightening regime, which could see interest rates soar another 25 basis points before the end of the year in an effort to curb inflation to central bank levels. 2% target.
During his remarks at the International Monetary Fund’s policy panel in Washington, D.C., Powell made clear that the central bank’s historic wave of interest rate hikes is not necessarily over.
“We’ll keep at it until the job is done,” Powell added of the Federal Reserve’s 2% inflation target, which the U.S. economy hasn’t seen since 2012.
Since last year, the Federal Reserve has raised interest rates 11 times — the fastest pace of adjustment since the early 1980s.
