WASHINGTON- US consumers’ near-term inflation expectations fell to a one-year low in September and the outlook over the next five years also improved, easing fears that the Federal Reserve could raise interest rates by a full percentage point this week.
The University of Michigan’s survey followed in the wake of data this week showing a surprise increase in consumer prices in August, which raised concerns that high inflation was becoming entrenched.
“This more or less silences those calls for a 100-basis-point hike next week,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
The University of Michigan survey’s reading of one-year inflation expectations dropped to 4.6 percent, the lowest since September 2021, from 4.8 percent in August. The survey’s five-year inflation outlook slipped to 2.8 percent, falling below the 2.9 percent-3.1 percent range for the first time since July 2021.
