Americans are hopeful that the annual increase in prices will soon return to prepandemic levels, according to a recent survey by the Cleveland Federal Reserve. Top executives expect the rate of inflation to taper to an average of 3.4% in the next 12 months, using the consumer-price index.
The good news is that the CPI is already there. The rate of inflation in the 12 months that ended in December was already at 3.4%, and it’s expected to drop to 2.9% in the January report, due out Tuesday morning. However, a better measure of future inflation was somewhat higher. The core CPI, which omits food and energy, stood at a 12-month rate of 3.9% at the end of 2023.
A long-running survey of consumers also found that Americans expect inflation to continue to decelerate toward prepandemic levels. Households expect 2.9% inflation in the next year, the consumer sentiment survey found. What both of these surveys show is that inflation expectations are well anchored, meaning nobody expects inflation to move up or down much from current levels.
The Fed wants inflation to return to 2% a year but is not there yet yet. Its job will be easier if consumers and businesses both think it will succeed in reaching its target. That’s because inflation expectations — whether high or low — often feed on themselves and influence each other’s decisions about spending and investment patterns.
Inflation has caused havoc on households and businesses for several years now but it seems like Americans are optimistic about their ability to control it soon.
Financial markets are counting on consumer-price inflation to fall below 3% for first time since 2021 and this could have a significant impact on global economies.
One good reason for Big Mac meal costing $18 is due