The January short-term inflation prediction, which predicts inflation in the U.S. for the next year, hit 5%. This is the same level as last December, when it hit a 17-month low. Despite the clear signs of a slowdown in prices, the market expects high levels of inflation to remain for a while, according to the analysis.
On the 13th (local time), the Federal Reserve Bank of New York (Fed) announced expected inflation for the next year, three years, and five years. Inflation prediction reflect market expectations for future inflation prospects.
The expected one-year short-term inflation rate was 5.0%. It is the same level as last December. In the mid- to long-term, inflation prediction for the next three years fell 0.3 percentage points from December to 2.7 percent, and inflation expected for five years rose 0.1 percentage point to 2.5 percent. The Federal Reserve Bank explained, “Inflation uncertainty remains unchanged on a one-year basis, but there have been slight changes on a three-year and five-year basis.”
Short-term inflation expectations remained in place in January, as the market expects prices to remain well above the Fed’s target of 2% for a while, rather than expectations for further declines in inflation. Reuters said, “Americans expect high inflationary pressure to continue in the short term,” and explained, “The expected inflation path is still well above the Fed’s target.”
On the 13th, the U.S. stock market rose amid expectations that the Consumer Price Index (CPI) would fall in January. Media such as CNBC predict that the Fed will have no choice but to push for an aggressive rate hike again, including a 0.5 percentage point rate hike.
Fed officials are also raising their voices to raise interest rates further despite slowing inflation. “The overall level is still high, although inflation has been gently lowered in recent months,” Michelle Borman, a Fed director, said at a conference in Florida. “As labor demand exceeds supply, inflationary pressure is increasing.”
“Price stability is far away, and we need to tighten it further,” he said. “A continuous rate hike will be appropriate to raise the federal funds rate to a sufficiently restrictive level.”