The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the August 2023 Survey of Consumer Expectations, which shows that inflation expectations were largely stable, rising slightly at the short- and longer-term horizons, and falling slightly at the medium-term horizon. Income growth perceptions declined in August, and job loss expectations rose sharply to its highest level since April 2021. Perceptions about current credit conditions and expectations about future conditions both deteriorated. Households’ perceptions about their current financial situations and expectations for the future also deteriorated.
Federal Reserve Chair Jerome Powell said on Friday inflation is still too high, and he warned that restoring price stability will likely require an extended period of elevated interest rates.
Speaking to a gathering of economists and central bankers in Jackson Hole, Wyo., Powell said it's encouraging that inflation has cooled — from 9.1% last summer to 3.2% last month. Here's where inflation stands today — and why it's raising hope about the economy Economy Here's where inflation stands today — and why it's raising hope about the economy
But Powell stressed some of the improvement could be temporary, and he reiterated the Fed is committed to getting inflation all the way down to their 2% target.
"The process still has a long way to go," Powell said. "We are prepared to raise [interest] rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective."
The central bank has already raised its benchmark interest rate from near zero in early 2022 to just over 5.25% today — in the most aggressive series of rate hikes since the early 1980s.
Even President Joe Biden has some regrets about the name of the Inflation Reduction Act: As the giant law turns 1 on Wednesday, it's increasingly clear that immediately curbing prices wasn't the point.
While price increases have cooled over the past year — the inflation rate has dropped from 9% to 3.2% — most economists say little to none of the drop came from the law. What You Need To Know
Even President Joe Biden has some regrets about the name of the Inflation Reduction Act. “I wish I hadn’t called it that because it has less to do with reducing inflation than it has to do with providing alternatives that generate economic growth,” Biden said Thursday at a fundraiser in Utah
As the giant law turns 1 on Wednesday, it’s increasingly clear that immediately curbing prices wasn’t the point
Price increases have indeed cooled over the past year, with the inflation rate dropping from 9% to 3.2%
But economists say little to none of the drop came from the law. Harvard University economist Jason Furman says he can't “think of any mechanism” by which the law would have reduced inflation
“I can’t think of any mechanism by which it would have brought down inflation to date," said Harvard University economist Jason Furman, who added that the law could eventually help to lower electricity bills.
Alex Arnon, an economic and budget analyst for the University of Pennsylvania’s Penn Wharton Budget Model, offers a similar assessment.
“We can say with pretty strong confidence that it was mostly other factors that have brought inflation down,’’ he said. "The IRA has just not been a significant factor.’’
That shouldn't come as a surprise.
When the Inflation Reduction Act was proposed, the Congressional Budget Office said its impact on inflation would be “negligible."
So why the name? It may ultimately help to hold down prices in the future — and it fit the politics of the moment.
The Bloomberg Barclays U.S. Aggregate Bond Index, a benchmark that is kind of like the S&P 500 for bonds, fell by roughly 15% — its steepest drop since 1976, when it was created.
This year, stocks have staged an impressive recovery — the Nasdaq is up more than 30% so far. But the bond market has barely rebounded.
That's largely because investors are betting inflation will remain above the Fed's target for a while, which means policymakers will have to keep interest rates high.