Highlights
Fed Chief Jerome Powell and his colleagues have made clear their number one priority is ensuring inflation expectations remain anchored in the face of the tariff shock. At 10 am ET today, the Fed and investors will get the latest update on the most current barometer of consumer inflation expectations from the well-respected University of Michigan's survey. Powell often cites the Michigan survey as one he tracks closely.
Consumer inflation expectations for the year ahead have shown a shocking rise in the Michigan survey, with four straight months of increases of 0.5 percentage points or more. Year-ahead inflation expectations surged from an already elevated 5.0 percent in March to 6.5 percent in April, the highest reading since the dark days of 1981. That is when Powell's hero, Paul Volcker, was obliged to raise the federal funds rate to a high of 20 percent to break the back of inflation. No one is suggesting the Fed needs to raise rates that high now, but much depends on what happens with inflation, and inflation expectations.
For today's report, the first for May, the Econoday consensus forecast calls for a modest uptick to 6.6 percent in one-year expectations, from 6.5 percent in the final April reading, and up from 3.3 percent a year ago in May 2024. Of course, the actual report has shown an unfortunate and ugly tendency to top expectations so far in 2025. The five-year inflation expectations figure has been somewhat better behaved, up to 4.4 percent in April from 3.0 percent in December. But that too is shocking for an indicator that held near 3.0 percent through 2024.
Stay tuned at 10 am ET.
Consumer inflation expectations for the year ahead have shown a shocking rise in the Michigan survey, with four straight months of increases of 0.5 percentage points or more. Year-ahead inflation expectations surged from an already elevated 5.0 percent in March to 6.5 percent in April, the highest reading since the dark days of 1981. That is when Powell's hero, Paul Volcker, was obliged to raise the federal funds rate to a high of 20 percent to break the back of inflation. No one is suggesting the Fed needs to raise rates that high now, but much depends on what happens with inflation, and inflation expectations.
For today's report, the first for May, the Econoday consensus forecast calls for a modest uptick to 6.6 percent in one-year expectations, from 6.5 percent in the final April reading, and up from 3.3 percent a year ago in May 2024. Of course, the actual report has shown an unfortunate and ugly tendency to top expectations so far in 2025. The five-year inflation expectations figure has been somewhat better behaved, up to 4.4 percent in April from 3.0 percent in December. But that too is shocking for an indicator that held near 3.0 percent through 2024.
Stay tuned at 10 am ET.
Definition
Market Focus details key factors in the coming day that will impact the economic outlook and the financial markets. These include central bank events, economic indicators, policymaker speeches as well as expected political and corporate developments.
Description
Keeping up-to-date with event schedules and the economic calendar is key to understanding the global financial system. Econoday's Market Focus allows investors and policymakers to carefully track what will be making news and moving the financial markets in the coming day.
