The Leuthold Group chief investment strategist Jim Paulsen, Main Street Asset Management CIO Erin Gibbs and Harris Financial Group managing partner Jamie Cox share their market analysis and investing advice.
Americans’ inflation fears continued to accelerate in October, climbing for the 12th consecutive month in a row to another record high, according to a key Federal Reserve Bank of New York survey published Monday.
The median expectation is that the inflation rate will be up 5.4% one year from now, the highest level for the gauge since its launch in June 2013, according to the New York Federal Reserve’s Survey of Consumer Expectations. Inflation expectations over the next three years remained unchanged at a median of 4.2%, a series high.
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“Median inflation uncertainty – or the uncertainty expressed regarding future inflation outcomes – increased at both the short- and medium-term horizons. Both measures reached series highs in October,” the survey said.
With consumers braced for the highest inflation levels in nearly a decade, they are also expecting the price of things like food, gasoline, rent and college tuition to rise over the next year. The only things that Americans expect to get cheaper over the next year are home prices and medical care.
The report is based on a rotating panel of 1,300 households.
Federal Reserve Chairman Jerome Powell has largely attributed the spike in consumer prices to pandemic-induced disruptions in the supply chain, a shortage of workers that has pushed wages higher and a wave of pent-up consumers flush with stimulus cash.
Although Powell has repeatedly said the rise in inflation is likely “transitory,” he acknowledged last week during the Fed’s two-day policy-setting meeting that the surge may not fade until the latter half of 2022. He maintained that wild swings in consumer prices will stop once current pressures on the supply chain dissipate.
“Our baseline expectation is that supply bottlenecks and shortages will persist well into next year and elevated inflation as well,” Powell told reporters. “And that, as the pandemic subsides, supply chain bottlenecks will abate and job growth will move back up. And as that happens, inflation will decline from today’s elevated levels.”
His comments came after the Federal Open Market Committee voted to begin pulling back on the extraordinary stimulus it has given the economy since March 2020. The U.S. central bank announced that it would reduce its aggressive bond-buying program by $15 billion a month in mid-November, lowering its purchases of long-term Treasury bonds by $10 billion a month and purchases of mortgage-backed securities by $5 billion a month.
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Powell has stressed that Fed policymakers will wait for the supply chain disruptions to dissipate and inflation to slow before hiking rates.
“We will be patient,” he said. “If a response is called for, we will not hesitate.”
The Bureau of Labor Statistics is slated to release the latest consumer price index data on Wednesday at 8:30 a.m. ET.