New York Fed: short-term inflation expectations for February drop sharply

By Michael S. Derby

NEW YORK, March 13 (Reuters) – Short-term expectations for future inflation in the U.S. economy fell last month to levels not seen nearly two years ago, the Federal Reserve Bank said on Monday. from New York.

In its latest consumer expectations survey, the entity pointed out that in February, respondents expected inflation a year from now to be 4.2%, a notable drop from 5% of January. The one-year forecast reading was the lowest since the 4% seen in May 2021.

For its part, the level of inflation expected within three years remained stable at 2.7%, equaling the last level observed in October 2020, while within five years it stood at 2.6%, against 2.5% in January.

The survey comes on the eve of the Fed’s next monetary policy meeting on March 21-22, and until the weekend the meeting was expected to lead to higher interest rates as the Fed moves forward with its efforts to cool high levels of inflation. .

However, the failure of Silicon Valley Bank, which forced government authorities to offer new liquidity aid to the banking system, changed the outlook for monetary policy and caused some analysts, such as Goldman Sachs, to oppose a rate hike at the next Fed meeting.

To further complicate the outlook for monetary policy, the government is due to report on the consumer price picture for February on Tuesday. Strong data could once again put pressure on the Fed to raise rates again.

The New York Fed report was written before the SVB situation and does not reflect its impact.

The report revealed lower price expectations in several key components. Over the past month, households have seen easing price pressures on gasoline, food, rent, health care and college education. The report also notes that the public has a more optimistic view of the labor market, as well as a better view of national finances.

According to the report, households expect house prices to rise 1.4%, up from 1.1% in January. However, the bank noted that last month’s reading is still well below the 12-month average, which forecasts a 3.4% rise in house prices.

(Edited in Spanish by Carlos Serrano)