Mercy Me! Inflation Expectations Are No Longer Well Anchored

Hello Fed. Let’s discuss “well anchored” inflation expectations.

by Mike ‘Mish’ Shedlock
Mish Talk

The New York Fed’s latest Survey of Consumer Expectations shows another huge leap in inflation expectations.

The June 2021 Survey of Consumer Expectations shows that median inflation expectations at the short-term horizon climbed 0.8 percentage point to 4.8 percent, while inflation expectations at the medium-term horizon remained unchanged.

Inflation Data Description

— Median one-year ahead expected inflation rate: Respondents are asked for the percent chance that, over the next 12 months, the rate of inflation (deflation) will be 12% or higher; between 8% and 12%; between 4% and 8%; between 2% and 4%; between 0 and 2%. A generalized beta distribution is fitted to the responses of each survey participant and the mean of this distribution is calculated. This is the respondent’s “expected inflation rate”.

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