Optimism Aside, Inflation Is Here To Stay

Sep. 27, 2022 12:52 PM ETTBT, TLT, TMV, IEF, SHY, TBF, EDV, TMF, PST, TTT, ZROZ, VGLT, TLH, IEI, BIL, TYO, UBT, UST, PLW, VGSH, SHV, VGIT, GOVT, SCHO, TBX, SCHR, GSY, TYD, EGF, VUSTX, FIBR, GBIL, UDN, USDU, UUP, RINF, AGZ, SPTS, FTSD, LMBS1 Comment
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Summary

  • Last week, markets finally priced in the fact that inflation is not going away easily or soon. Consumers are feeling inflation, but may also be overly optimistic about the future.
  • The most recent Survey Data from the New York Fed shows consumers' 1-year inflation expectation fell from 6.8 to 5.7% last month, and they expect inflation to be back to 2.8% within 3 years.
  • To some extent, rents are backward-looking, but because leases normally last a year or more, they can be forward-looking, which suggests where it counts, inflation may be getting more persistent than consumers realize.

INFLATION word on calculator in idea for FED consider interest rate hike, world economics and inflation control, US dollar inflation

Khanchit Khirisutchalual

By Allison Schrager

Last week, markets finally priced in the fact that inflation is not going away easily or soon. Consumers are feeling inflation, but may also be overly optimistic about the future. The most recent Survey Data from the New York Fed shows consumers' 1-year inflation expectation fell from 6.8 to 5.7% last month, and they expect inflation to be back to 2.8% within 3 years. Their optimism is probably due to falling oil prices. But expectations on prices aren't totally consistent with their expectations for rent. Survey respondents expect rent to go up 11.5% in the next year and 5.2% over the next 3 years. To some extent, rents are backward-looking, but because leases normally last a year or more, they can be forward-looking, which suggests where it counts, inflation may be getting more persistent than consumers realize.

Rent
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NYFED

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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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e21: Economic Policies for the 21st Century is a Washington-based center of the nonprofit, nonpartisan Manhattan Institute dedicated to economic research and innovative public policies for the 21st century. Drawing on the expertise of practitioners, policymakers, and academics, we aim to advance free enterprise, fiscal discipline, economic growth, and the rule of law.

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