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In “Barron’s Roundtable,” Torsten Slok, chief economist at Apollo Global Management, analyzes the US economy as the Federal Reserve seeks to further ease inflation.

A major New York Federal Reserve survey released on Monday showed that consumer expectations of inflation a year from now fell again in August.

The median expected value is inflation rate The New York Federal Reserve’s Consumer Expectations Survey shows a rise of 5.7% after a year, down from a record 6.2% in June. Three years from now, consumers see inflation falling slightly to 2.8%. That’s down from his record of 3.2% last month.

Consumers expect prices to fall further over the next five years and expect inflation to hover around 2% in 2027.

“Median inflation uncertainty, or expressed uncertainty about future inflation outcomes, decreased in the short term and remained unchanged in the medium term,” the study said.

Inflation is currently causing economic pain for most Americans, survey shows

Shoppers walk through the milk and cream section of a supermarket in Montebello, California on August 23, 2022. (((Photo by FREDERIC J. BROWN/AFP via Getty Images) / Getty Images)

This report is based on a rotating panel of 1,300 households.

Research plays an important role in determining the method. Fed Policymakers Respond to Inflation crisis. That’s because the actual rate of inflation will depend, at least in part, on what happens to consumers. This is like a self-fulfilling prophecy. If everyone expects prices to rise by 3% this year, that’s a signal to companies that they can raise prices by at least 3%. On the other hand, the worker will want a 3% wage increase to offset the rising costs.

Fed officials approved a rate hike of 75 basis points for the first time since 1994, following a better-than-expected rise in inflation expectations in May.

Billionaire David Rubenstein warns it’s ‘difficult’ for the Fed to bring inflation down

In explaining the Fed’s decision at the post-meeting press conference, Chairman Jerome Powell said policymakers: I was looking for evidence that monthly inflation was leveling off or starting to decline. With consumer prices repeatedly on an unexpected upward trend and inflation expectations unexpectedly rising, officials have determined that “strong action is warranted,” he said.

“One of the factors in the decision to move forward at 75 basis points today is what we’ve seen in inflation expectations,” Powell said at a news conference after the meeting. “We are absolutely determined to stick with 2%. That was one of the reasons, another was just the CPI reading.”

U.S. Federal Reserve Chairman Jerome Powell speaks at a post-meeting press conference of the Federal Open Market Committee in Washington, DC, Wednesday, May 4, 2022. (Photo by Al Drago/Bloomberg via Getty Images/Getty Images)

Policymakers approved another 75-basis-point rate hike in July, and have shown in recent weeks that another rate hike of that magnitude is being considered for September in a rush to catch up with runaway inflation. . Powell warned that raising interest rates to tackle inflation could have “painful” consequences for households and businesses, possibly in the form of higher unemployment.

“Higher interest rates, slower growth and a softer labor market will keep inflation down, but will also cause some pain to households and businesses,” he told the Fed’s annual economic symposium in Wyoming. “These are the unfortunate costs of keeping inflation under control. But failure to restore price stability will be far more painful.”

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The new inflation expectations forecast was released just days before the release of new consumer price index data, which is expected to be another big bang. That’s down from the June high of 9.1% and below the July reading of 8.5%, but well above pre-pandemic levels.