Source: NY Fed, Bloomberg, Unigestion, as of 23.09.2021
The Fed have reiterated their belief that the current spike in inflation is transitory and should normalise in the coming months. However, US households are not sharing this view. To understand this, we analysed the monthly surveys of the New York Fed. Our chart, compares the future evolution of expectations for inflation and wage growth and shows 1) that households see the inflation shock as lasting with a high level of uncertainty; and 2) a disconnection between expectations of future inflation and wage growth. The most important factors in the CPI – Energy and Shelter – are both up sharply and are the main contributors to the rise in household inflation expectations.
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