Pressure under pressure as inflation expectations increase

Officials of the Federal Reserve received a clear message because President Trump has greatly increased the World War of Trade this month. Keeping the expectations of inflation under control as price pressure increases is their priority n ° 1.

On Friday, they faced a large setback.

A new survey published by the University of Michigan revealed that as consumers’ feeling, another nose due to the fears associated with Mr. Trump’s prices, expectations concerning inflation – in the coming year and during a longer horizon – have grown strongly.

Over the next 12 months, respondents now expect inflation to reach 6.7%, the highest reading since 1981 and a significant increase compared to March 5%. In five years, they are preparing for inflation to get stuck above 4%. The objective of the Fed is inflation of 2%.

There are reasons to take this data with a grain of salt. On the one hand, the survey tends to reflect political biases. Since Trump returned to the White House, Democrats, formerly optimistic about prospects, have become much more optimistic, not only on inflation but also on growth and the labor market. The Republicans, on the other hand, have passed to be much more pessimistic during the presidency of Biden to much more positive.

On the sidelines, this political fracture can start to shrink, with the drop in feeling in April “omnipresent and unanimous through age, income, education, geographic region and political affiliation”, according to Joanne W. HSU, director of consumer surveys. The self -employed also begin to change their opinions distinctly, representing a large part of the increase in inflation expectations in the longer term.

What has helped to relieve concerns about the results of the survey somewhat, is the fact that market expectations of inflation in the longer term, which are based on American state obligations, have remained much more stable. The divergence was so austere to encourage Jerome H. Powell, the president of the Fed, to designate the poll of the University of Michigan as “aberrant value” last month.