According to a survey conducted Monday by Federal Reserve in New York, consumers increasingly doubt whether the central bank can achieve its inflation goals in the near term.
Forecasts for next year remained unchanged at 3%, but this was not the case for the long term. Three-year expectations rose 0.3 percentage points to 2.7%, while five-year prospects rose even further, up 0.4 percentage points to 2.9%.
All three are well above the Fed’s 2% target for 12-month inflation, indicating the central bank may need to maintain tighter policy for longer. Economists and policymakers view expectations as a key factor in assessing the path of inflation, so February’s consumer expectations survey could be bad news.
“Long-term inflation expectations appear to have remained well anchored, as reflected in a broad range of surveys of households, businesses and forecasters, as well as measures of financial markets,” the Fed chair said last week Jerome Powell during testimony on Capitol Hill. “We remain committed to returning inflation towards our 2% target and keeping long-term inflation expectations well anchored.”