US Consumer Inflation Expectations Surge Amid Tariff Concerns in January
In January, U.S. consumers’ inflation expectations rose sharply due to fears of tariffs impacting prices
Inflation, Tariffs, Donald Trump, Consumer Sentiment, Economy, Washington, USA
Washington: So, it looks like U.S. consumers are getting a bit anxious about inflation. In January, they expect prices to go up more than they did last month. This jump seems to be tied to worries about tariffs that President-elect Donald Trump might put in place.
The University of Michigan’s survey showed that people think inflation will hit 3.3% over the next year, which is the highest it’s been since May. Just last month, it was at 2.8%. This is a big change, especially compared to the 2.3%-3.0% range we saw before the pandemic.
Long-term expectations are also up, hitting 3.3%, the highest since June 2008. It seems like folks across different income levels are feeling the pinch, especially those with lower incomes and Independents.
Trump’s plans to raise tariffs and deport undocumented immigrants have economists worried that these moves could push prices even higher. Remember, a lot of people were frustrated with rising prices, and that frustration helped Trump win the election.
Now, with inflation expectations climbing, it’s making the Federal Reserve think twice about cutting interest rates this year. They’re likely to keep rates steady in the 4.25%-4.50% range for a while.
In fact, the Fed has already cut rates by 100 basis points since last September. They initially thought they’d cut rates four times this year, but now they’re only looking at two cuts.
All this talk about rising prices is starting to affect how people feel about the economy. The University of Michigan’s consumer sentiment index dropped a bit this month, showing that people are feeling less confident than they did after the election.
Oliver Allen, an economist, pointed out that consumers are worried about how tariffs could raise prices on many goods. It seems like Trump’s economic policies are making some folks uneasy.
On another note, the LSEG/Ipsos Consumer Sentiment Index also fell in January, which suggests people are feeling less comfortable making big purchases or investing in their future.
Johnny Sawyer from Ipsos mentioned that it’s unclear if this drop in sentiment is a sign of a bigger problem or just a temporary dip. Only time will tell!
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