NY Fed Survey of consumer expectations:1Y inflation higher @ 3.6% vs 3.4%. 5Y steady at 3%
At a Glance
The desk interprets the latest NY Fed Survey of Consumer Expectations as a signal of rising inflationary pressures, particularly with one-year-ahead inflation expectations increasing to 3.6% from 3.4% in March. This uptick suggests that consumers are becoming more concerned about short-term inflation, which could influence monetary policy decisions. Per the full note source, the unchanged five-year inflation expectations at 3.0% indicate a potential stabilization in long-term inflation outlooks, but the mixed signals on consumer finances and credit access could complicate this picture. Overall, the data reflects a cautious consumer sentiment that may impact central bank strategies moving forward.
Full Analysis
What the desk is arguing
The desk frames this as a critical moment for inflation expectations, especially given the rise in one-year-ahead inflation projections. The increase to 3.6% is significant, as it reflects a shift in consumer sentiment that could pressure the Federal Reserve to adjust its policy stance sooner rather than later.
Supporting this view, the survey indicates a deterioration in credit access and rising expectations for future unemployment, which could further complicate economic recovery. The unchanged five-year inflation expectations at 3.0% suggest that while short-term concerns are rising, long-term inflation may not be perceived as a significant threat at this stage.
Where it sits in our coverage
Our consensus target for USD/JPY is 1.075, with a range from 1.04 to 1.12. Notable firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.12 (Mar26)
This view aligns with jpmorgan's target, which is at the upper bound of our consensus range, indicating a bullish sentiment towards the dollar against the yen amid rising inflation expectations.
How other firms see it
Firms like citi and jpmorgan share a similar outlook, emphasizing a cautious approach towards inflation and potential Fed actions. Conversely, bofa holds a more bearish view, suggesting that inflation pressures may not be as pronounced as the current data indicates.
The trajectory of USD/JPY is particularly relevant here, as it reflects broader market sentiments influenced by Fed policy. Additionally, the upcoming US CPI data will be crucial in shaping expectations around inflation and potential rate adjustments.
What the calendar says
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From the original
April one-year-ahead expected inflation: 3.6% versus March’s 3.4% April three-year-ahead expected inflation: Unchanged at 3.1% April five-year-ahead expected inflation: Unchanged at 3.0% April year-ahead home price rise expected: 3.0% versus March’s 3.3% April year-ahead gasoline
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Fed still sidelined even as US inflation picks up in April - CIBC
The desk interprets the recent uptick in US inflation data as a signal that the Federal Reserve remains firmly on the sidelines, despite rising price pressures. Per the full note from CIBC, the April CPI rose to 3.8% year-on-year, slightly above the 3.7% consensus, driven by higher energy and shelter costs. This inflationary pressure is not expected to prompt an immediate Fed response, as market expectations currently align with no rate changes until year-end. The desk emphasizes that the Fed is likely to remain inactive until inflation trends closer to its 2% target or unemployment rises significantly, which aligns with CIBC's forecast.