A broad gauge of inflation expectations, which Federal Reserve Chairman Jerome Powell had pointed to as a reason for June’s huge rate hike (by 75 basis points), is expected to show a big increase when it is released on July 15.
This is the index of joint inflation expectations, compiled by the Fed’s economists at the end of 2020, and includes more than 20 individual indicators that measure the attitudes of consumers, analysts and investors towards future price increases.
As Bloomberg reported, economists at Goldman Sachs, Deutsche Bank and Nomura all predict a big rise in the index, whose measurement will be announced on July 15.
“We expect the index to set a record” for data dating back to 1999, said Robert Dent, senior U.S. economist at Nomura Securities, adding that the index was being pushed up by increases in household and analyst expectations.
The upward trend has already caught the attention of Fed officials and is influencing monetary policy.
“The headline index of inflation expectations has gone up after being fairly stable for a long time, so we’re watching it and thinking about it. It’s something we have to take seriously,” said J. Powell told reporters on June 15, following the Fed’s biggest rate hike since 1994, by 75 basis points.
The Fed chairman had also pointed to the index as one of the reasons why the Fed raised interest rates by more than 50 basis points, the level that markets had long expected ahead of the June meeting.
Source: Capital
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