US Inflation Expectations Ease in May

• Americans' anxiety about the future path of inflation eased in May, as they also grew more upbeat about the state of their personal finances, according to a report released on Monday by the New York Federal Reserve.
• The regional Fed bank reported in its Survey of Consumer Expectations that the outlook for inflation across all the horizons it measures retreated last month. A year from now, survey respondents see inflation at 3.2% versus 3.6% in April, while three years from now it's expected to be 3% versus 3.2%. Five years from now, inflation is projected to be 2.6%, compared to expectation of 2.7% in the survey for April.
• The report found that respondents are expecting moderating price gains for gas, rent, medical care and college, while food costs a year from now are seen rising at a 5.5% rate, which would be the highest level since October 2023. Meanwhile, in May, the year-ahead expected rise in house prices stood at 3%, down from 3.3% in April.
• The moderation in the inflation outlook took place against a background of high uncertainty over the future of price pressures. Huge and ever-shifting tax hikes on imports imposed by the Trump administration are broadly expected by economists and policymakers to push up inflation, while depressing hiring and growth. The major question is whether the gain is a one-off or the makings of something more persistent.
• The New York Fed report also found that households upgraded their views on their incomes, earnings, hiring prospects and finances. The survey found households also had "slightly" improved views on their current financial situation in May, as respondents said access to credit improved relative to last year, while expectations of missing a debt payment declined.

(Source: Reuters)