According to a recent survey by the New York Federal Reserve, Americans’ inflation expectations have dropped to the lowest level in three years. “How much worse could it get?” the average person assumes. The median expectation is that the inflation rate will be up 3% one year from now, down from a high of 7.1% recorded in June 2022. The survey found that Americans anticipate wages rising by 3% to meet their inflation expectations. Consumers have not been this optimistic since January 2021.
However, the people still anticipate that inflation will remain above the Fed’s 2% target in the longer term, with projections of around 2.6% three years from now and 2.5% five years from now. The Federal Reserve’s last forecast states inflation will decline to 2.2% in 2025 before reaching its lofty 2% target in 2026.
The year began with a massive disruption in the global supply chain and increased cargo costs. There are countless protests occurring among farmers across the world who disagree about the future of crops and food price stability. The leading driver that is not discussed – WAR! America is funding two major conflicts at the moment and sinking deeper into debt. The extreme geopolitical uncertainty and risks associated with war always lead to higher energy prices, increased production costs, and massive government spending, further fueling inflation.