A New York Federal Reserve survey released Monday shows consumers are bracing for inflation to remain above the central bank's 2% target in the long term.
That is because actual inflation depends, at least in part, on what consumers think it will be. It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs. has repeatedly stressed that policymakers are committed to wrangling inflation back to the Fed's 2% target goal.
Federal Reserve Board Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, D.C., on May 3, 2023. "A strong majority of committee participants expect that it will be appropriate to raise interest rates two or more times by the end of the year," Powell said at the end of June, referring to the Federal Open Market Committee. "Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go."
Policymakers have lifted the benchmark federal funds rate 11 times over the span of 16 months to the highest level since 2001. However, they are widely expected to hit pause on the tightening campaign during their next meeting in September in order to assess the impact of higher rates on the economy.The latest inflation expectation projections come just one week after the release of new consumer price index data, which showed the growing stickiness of higher inflation. Prices climbed 3.
It marked the first acceleration in the headline figure in more than a year, underscoring the challenge of
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