Inflation expectations in July fell across all time horizons, according to a monthly survey by the New York Fed released Monday. The median expectation of inflation over the next three years dropped to 3.2% in July from 3.6% in the prior survey and a 3.9% increase in May. In the short run, consumer inflation expectations dropped to 6.2% from a record high 6.8% in June. Longer-run 5-year inflation expectations declined to 2.3% from 2.8% in the prior month. Fed officials pay close attention to consumer attitudes about inflation because research has shown that inflation and consumer assumptions seem to often move in tandem. Expectations about year-ahead increases for gas and food fell sharply. Consumers expect home prices to rise 3.5%, the lowest reading since November 2020.
