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Inflation to remain high this year but cools over the next five years - New York Federal Reserve

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(Kitco News) - While inflation pressure pressures might have peaked at a 40-year high, consumers are not expecting prices to go down anytime soon, according to the latest data from the New York Federal Reserve.

In a blog post Thursday, the regional central bank released the results of its latest Survey of Consumer Expectations. According to the survey, consumers expect inflation to remain elevated through this year and potential for the next three years.

However, the central bank appears to be taking a victory lap as long-term inflation expectations remain anchored.

"Unlike one-year-ahead inflation expectations, which are still on an increasing trajectory, three-year-ahead inflation expectations have leveled off in recent months and even started decreasing slightly after reaching a peak of 4.2 percent in September and October 2021. Looking now at the few data points we have for the longer horizon, five-year-ahead inflation expectations have been remarkably stable in recent months and substantially lower than short- and medium-term inflation expectations," the analysts said in the report.

According to the report, consumers expect inflation pressure to hold above 6% this year. At the same time, inflation in the next three years is expected to moderate to 4%. Finally, consumers see inflation holding steady at 3%.


"The results presented in this blog post provide fresh evidence that consumers still do not expect the current spell of high inflation to persist long into the future," the analysts said.

According to some economists, the Federal Reserve's tough talk regarding rising consumer prices has helped keep long-term inflation expectations from becoming unanchored, which in part is weighing on gold prices.

Wednesday, the Federal Reserve, in the minutes of its May monetary policy meeting, reaffirmed its commitment to fighting inflation. The central bank signaled that it could raise interest rates by 50 basis points at the next couple of meetings.

Gold remains an important stabilizing asset as stagflation threat grows - Axel Merk

However, some market analysts have noted that there is still a lot of uncertainty as to whether or not the U.S. central bank will be able to engineer a soft landing that would cool down inflation pressure but not tip the economy into a recession.

Some market analysts have said that rising stagflation fears will continue to support gold prices. The precious metal has struggled in the face of rising interest rates and surging bullish momentum in the U.S. dollar; however, sentiment is starting to shift as the precious metal continues to trade on either side of $1,850 an ounce.

"Wall Street will wait to see what happens with inflation over the next couple of months and that could mean that gold might be ready for a short-term consolidation phase, with the $1839 providing initial support and $1870 being the ceiling," said Edward Moya, senior market analyst at OANDA, in a note Thursday.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.