The expectations of U.S. businesses forinflation over the coming decade moved significantly higher in recent months, an indication that inflationary pressures continue to build and push expected inflation well above the Federal Reserve’s target rate of two percent.
The Atlanta Fed said Wednesday that its latest survey of U.S. businesses showed that long-term inflation expectations had increased. Over the next ten years, businesses now expect inflation to average 3.2 percent. The Atlanta Fed’s business expectations survey asks for long-term forecasts every quarter. Last time, the 10-year average was expected to be three percent. This is the highest level of expectations in survey data that go back to 2012.
Federal Reserve officials tend to believe that inflation expectations play a significant role in the direction of prices. When firms expect more inflation ahead, they adjust their own prices and costs, which then can push up prices. Not all economists agree that expectations play as significant of a role as Fed officials think.
This is well above average. Until recently, it was extremely rare for the long-term average to hit three percent.
Short term inflation expectations, over the next year, also increased. These went from 3.3 percent a month ago to 3.4 percent now. This is also an indicator that inflationary pressures continue to build rather than decline and the highest on records going back to 2012.