U.S. consumers' projection of inflation over the short run fell to the lowest level in nearly three years in December, the New York Federal Reserve said in a report on Monday, Reuters reported. Inflation one year from now is expected to be at 3%, the lowest reading since January 2021, versus a projection of 3.4% in November, the regional Fed bank said in its latest Survey of Consumer Expectations. Poll respondents saw inflation three years from now at 2.6%, compared to 3% in November, while price pressures five years ahead were at 2.5% versus 2.7% in November. The survey also found that respondents projected bigger increases for college costs in December relative to November, while expectations for food and rent increases fell. The expected year-ahead rise in gasoline prices held steady at 4.5% in December, with expectations for home price rises unchanged at 3%. Ebbing inflation expectation readings bolster the broad consensus in financial markets and among U.S. central bank policymakers that inflation pressures will continue to retreat back toward the Fed's 2% target. Fed officials generally believe that inflation expectations strongly influence what actual price pressures do, so the pullback in the December poll buttresses the view that real-world inflation will continue to moderate.
