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Long-term inflation expectations rise, spelling possible trouble for the Fed, survey shows

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Customers shop at a Costco store on August 31, 2023 in Novato, California.

Justin Sullivan | Getty Images News | Getty Images

Consumers increasingly doubt the Federal Reserve can achieve its inflation goals anytime soon, according to a survey Monday from the New York Federal Reserve.

While the outlook over the next year was unchanged at 3%, that wasn’t the case for the longer term. At the three-year range, expectations rose 0.3 percentage point to 2.7%, while the five-year outlook jumped even more, up 0.4 percentage point to 2.9%.

All three are well ahead of the Fed’s 2% goal for 12-month inflation, indicating the central bank may need to keep policy tighter for longer. Economists and policymakers consider expectations as a key factor in viewing the path of inflation, so the Survey of Consumer Expectations for February could be bad news.

“Longer-term inflation expectations appear to have remained well anchored, as reflected by a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets,” Fed Chair Jerome Powell said last week during testimony on Capitol Hill. “We remain committed to bringing inflation back down to our 2 percent goal and to keeping longer-term inflation expectations well anchored.”

Fed Chair Powell: Not looking for inflation to go 'all the way down' to 2%

Headline inflation as judged by personal consumption expenditures prices, the Fed’s preferred gauge, rose 2.4% in January — or 2.8% at the core level when excluding food and energy. Those readings represented progress in the Fed’s battle, though some economists have warned the “last mile” back to 2% would be the most difficult.

The Fed is expected to hold rates steady when it meets next week, with market pricing pointing to a cut in June followed possibly by three more before the end of the year, according to CME Group gauging of futures markets.

Other inflation measures in the February survey offered some hope.

Most notably, the outlook for rent costs decreased to 6.1%, down 0.3 percentage point for the lowest reading since December 2020. Shelter has remained the most stubborn of the inflation components but one Fed officials think will ease as the year goes on and tenants negotiate new leases.

Elsewhere, the one-year outlook for gas rose 0.1 percentage point to 4.3%, fell by 1.8 percentage points to 6.8% for medical care and was unchanged for food at 4.9%. The outlook for household spending over the next year rose to 5.2%, up 0.2 percentage point.

Respondents also indicated some unease over job prospects. The perceived probability for losing one’s job in the next year rose to 14.5%, an increase of 2.7 percentage points.

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Economics

Trump advisor Hassett confident tariffs will stay despite judges’ ruling

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National Economic Council Director Kevin Hassett speaks to reporters at the White House in Washington, D.C., U.S., April 14, 2025. 

Kevin Lamarque | Reuters

A top economic advisor to President Donald Trump expressed confidence Thursday that court rulings throwing out aggressive tariffs will be overturned on appeal.

Kevin Hassett, director of the National Economic Council, said in an interview that he fully believes the administration’s efforts to use tariffs to ensure fair trade are perfectly legal and will resume soon.

“We’re right that America has been mishandled by other governments,” Hassett said during a Fox Business interview. “This trade negotiation season has been really, really effective for the American people.”

The comments follow a ruling from judges on the Court of International Trade who said Trump exceeded his authority on tariffs, which are aimed both at combating barriers against American goods abroad and stemming the flow of fentanyl across the U.S. border.

While the Centers for Disease Control and Prevention has said that fentanyl is the primary driver in domestic overdose deaths, the judges ruled that related tariffs “fail because they do not deal with the threats set forth in those orders.”

Hassett bristled at the ruling and said the administration will continue its anti-fentanyl efforts.

“These activist judges are trying to slow down something right in the middle of really important negotiations,” he said. “The idea that the fentanyl crisis in America is not an emergency is so appalling to me that I am sure that when we appeal, this decision will be overturned.”

The administration has multiple options to get around the judges’ ruling, including other sections of trade laws it can utilize. However, Hassett said that’s not the plan at the moment.

“The fact is that there are measures that we can take with different numbers that we can start right now. There are different approaches that would take a couple of months to put these in place,” he said. “We’re not planning to pursue those right now, because we’re very very confident that this ruling is incorrect.”

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America’s immigration detention centres are at capacity

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IN APRIL Todd Lyons, the acting director of Immigration and Customs Enforcement (ICE), lamented that it takes too long to deport illegal immigrants. At the Border Security Expo in Phoenix he told a crowd of startup bosses vying for government contracts that a better deportation system would function more like Amazon, the tech giant whose delivery drivers zigzag the country at record speed. “Like Prime, but with human beings,” he said.

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Demand for American degrees is sinking

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Trump’s war on universities is driving talent away

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