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US: Atlanta Fed Business Inflation Expectations
| Actual | Previous | |
| Year over Year | 2.4% | 2.3% |
Highlights
Year-ahead inflation expectations among firms surveyed in the Atlanta Fed district continue their slow rise to 2.4 percent in May from 2.3 percent in April, 2.1 percent in March and 1.9 percent in February, and versus 2.5 percent in May 2025.
One-year inflation expectations hit a recent peak of 2.8 percent in April 2025, the time of the Trump tariff shock, and trended down through the end of 2025 before trending back up in 2026 on the energy price shock linked to US attacks on Iran and the closure of the Strait of Hormuz. Federal Reserve officials appear very sensitive to any un-anchoring of inflation expectations above the 2 percent target and are likely to watch closely whether this indicator continues to rise or whether the impact of the energy shock dissipates.
Definition
The Atlanta Fed's Business Inflation Expectations survey provides a monthly measure of year-ahead inflation expectations and inflation uncertainty from the perspective of firms. The survey also provides a monthly gauge of firms' current sales, profit margins, and unit cost changes.
Description
The inflation expectations of firms are a critical component of the inflation outlook and provide guidance on the potential path of inflation. If firms expect that prices will increase at a given rate, their purchasing, pricing, and/or wage decisions will reflect this expectation, making the increase more likely to be realized.
Also important is the risk that firms attach to their inflation expectations. The methods the Atlanta Fed uses to compute firms' inflation expectations provide a direct measure of the subjective probabilities that firms assign to various inflation outcomes.
The FOMC judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Accurately gauging inflation expectations and uncertainties regarding these expectations are a key component of achieving this 2 percent target.
Other measures of inflation expectations are gleaned from consumer opinions, financial market instruments, and select industry groups (such as professional forecasters and purchasing managers), but there are no alternative measures of firms' inflation expectations.
When business expectations for inflation deviate from the FOMC's 2 percent target for inflation over the medium term (higher or lower than target), or when uncertainty about inflation runs higher than normal, it could be an early signal that the Federal Reserve is at risk of missing its price stability mandate. The inflation mandate is balanced against a goal of sustainable long-term employment growth.