The Balance Today: News You Need To Know on Sept. 12, 2022

Inflation’s Going To Improve, Many of Us Expect

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Ahead of the Labor Department’s inflation report for August tomorrow, many of us are expecting prices to grow at a slower pace a year from now. The Federal Reserve released the results of its latest survey of consumers on what they expect inflation to be in the future. In a sign of rising optimism, the research showed that those surveyed believe inflation will slow significantly, both in the medium and long term.

Median one-year-ahead expectations for the annual rate of inflation fell to 5.7% in August from 6.2% in July—still relatively high but far lower than the actual inflation rates we’ve seen all summer, with prices up 8.5% in July from the year before. Three-year-ahead projections fell from 3.2% to 2.8%, not far from the Fed’s target rate of 2%.

Meanwhile, more respondents believe their incomes will rise, as median expectations for rising income hit a record high of 3.5% in August. Fewer households reported they were in a worse financial situation compared to a year ago, and fewer households expect to be worse off a year from now. 

If you’re hoping to buy a home, you might also see prices continue to come down—or at least that’s what most people expect, with median home price growth expectations declining sharply to 2.1%, in the lowest reading since July 2020. That’s below pre-pandemic levels, reflecting broad declines across the country. In perspective, home price expectations have now fallen by nearly two-thirds since the April 2022 reading of 6.0%.

Tomorrow, the Bureau of Labor Statistics will release its update to the Consumer Price Index (CPI) for August, with economists forecasting the annual rate of inflation to come down to 8% year-over-year. While still relatively high and near its multi-decade highs early this summer, it would be lower than July's 8.5%.

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  1. Federal Reserve Bank of New York. "Inflation and Home Price Expectations Decline Further."

  2. MarketWatch. "This Week's Major U.S. Economic Reports & Fed Speakers."

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