A New York Federal Reserve survey published Monday shows that consumers are worried about a potential credit crunch and higher inflation in coming years.
Stifel Financial chief economist Lindsey Piegza and The Fitz-Gerald Group principal Keith Fitz-Gerald discuss what's driving the stock market rally as inflation levels remain elevated on 'The Claman Countdown.'
Consumers anticipate that inflation will remain sticky in coming years, according to the survey, estimating that inflation will hover around 2.8% three years from now. By comparison, central bank policymakers projected in their latest economic forecasts that inflation will fall to 2.5% next year. The survey, which is based on a rotating panel of 1,300 households, plays a critical role in determining howcrisis. That is because actual inflation depends, at least in part, on what consumers think it will be. It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs.
"I think by the actions that we take, though, we help keep longer-term inflation expectations anchored and keep the public believing in 2% inflation by the things that we do, even in times when energy is part of the story of why inflation is high," Powell told reporters last year.Policymakers already lifted the benchmark federal funds rate nine consecutive times and opened the door to another rate hike when they next meet in early May.
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