A recent survey revealed that the near-term inflation expectations of consumers in the United States of America declined in the current month of September to its lowest level in one year.
The University of Michigan poll last Friday also revealed, according to CNBC Arabia, that inflation expectations have improved over the next five years; This eased concerns that the Federal Reserve may raise interest rates by a full percentage point next week.
The survey came on the heels of data released this week that showed consumer prices surprisingly increased in August from expectations, raising fears that high inflation is becoming entrenched.
The reading of the University of Michigan survey of one-year inflation expectations fell to 4.6%, the lowest level since September last year, from 4.8% in August.
The survey's five-year inflation forecast fell to 2.8%, falling below the 2.9%-3.1% range for the first time since July 2021.
Inflation in the United States of America declined last August to record 8.3%, compared to expectations of 8.1%.
Jennifer Lee, chief economist at BMO Capital Markets in Toronto, said the declining inflation expectations are dampening calls for a 100 basis point increase next week.
The Fed is likely to find some reassurance that low inflation expectations do not seem to be out of reach, said Conrad de Cuadros, chief economic adviser at Brain Capital in New York.
After the release of strong consumer price readings for August, financial markets have speculated that the US Federal Reserve may raise the benchmark interest rate by 75 basis points at its policy meeting on September 20-21, with a probability of 100 points.
It is worth noting that the Fed raised interest rates by three-quarters of a percentage point in its June and July meetings. Since March, it has raised this rate from near zero to the current target range of 2.25% - 2.50%.
