Ahead of the Consumer Price Index for June, Consumers’ Inflation Expectations Continue to Rise

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The public is bracing for the worst on Wednesday as increases in the June consumer price indexes (CPI) from May are expected. Even the White House is anticipating bad news. Press Secretary Karine Jean-Pierre speculated that the CPI will be “highly elevated” due to the continued impact of the war in Ukraine.  

See: Cleveland Fed May Back 75 Basis Point Interest Rate Hike in July
Find: Could Falling Food Prices Signal End of High Inflation?

Inflation will remain a concern until there is a substantive sign of relief. Although April saw a slight decrease in consumer prices, it was a blip rather than a strong signal that inflation was about to peak.

With the consumer price index rising to 8.6% in May and further 75 basis point rate hikes by the Federal Reserve forecasted, the government is under immense pressure to ease the highest rate of inflation in 40 years or risk tipping the economy into a recession.

Not that this will come as much of a surprise to the average American. As CNN reports, according to the latest Survey of Consumer Expectation report by the Federal Reserve Bank of New York, expectations for rising prices and rates over the next 12 months increased to a new series high.

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The latest Survey, which includes index measures for expectations on inflation rates, labor market numbers and household finance trends, found that the median “one-year-ahead” expectation for inflation rose to 6.8% in June, up from 6.6% in May.

Additionally, household financial evaluations among those asked were depressed, as more people feel their current financial position is worse than it was a year ago, per CNN.

Surprisingly, given the short-to-medium outlook among Americans regarding consumer prices, the long-term expectations for certain consumer goods were slightly more confident. For example, the Survey of Consumer Expectations found respondents expect home prices to decrease by 4.4% over the next year (down from the 5.8% price increase in May).

Pessimistic attitudes toward inflation are prevalent among Americans. In June, The Washington Post reported on a poll it conducted with George Mason University’s Schar School of Policy and Government that found that those asked expect inflation to get worse and were changing their spending habits as a result or their beliefs.

66% of those surveyed expect inflation to get worse over the next 12 months, while only 21% thought it would get better and 12% responded that it would stay the same. Nearly half of the 66% believed that inflation would get much worse.

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In the same poll, 90% of Americans surveyed said they are actively shopping for bargains and cheaper products and about 75% of survey takers are curbing eating at restaurants, spending on entertainment and delaying purchases.

Whether the Federal Reserve’s strategy to rein in inflation will remain to be seen. Recently, both Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell have admitted they underestimated and misunderstood the current changing face of inflation.

See: Powell Says Fed Is Strongly Committed to Bringing Down Inflation: ‘There’s a Running Clock’
Find: Yellen Regrets Deeming Inflation ‘Transitory,’ Ups to ‘Unacceptable’ — How She Suggests Congress Can Help

“I think I was wrong then about the path that inflation would take,” Yellen told CNN. “There have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn’t — at the time — fully understand, but we recognize that now,” she said.

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About the Author

David Nadelle is a freelance editor and writer based in Ottawa, Canada. After working in the energy industry for 18 years, he decided to change careers in 2016 and concentrate full-time on all aspects of writing. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry.

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