Consumer expectations for inflation improve in July

Consumers’ inflation expectations improved in July amid plummeting gas prices and rising interest rates, according to a New York Federal Reserve survey released Monday. 

Respondents expect the inflation rate to average 6.2 percent over the next year, a sharp drop from 6.8 percent in June’s survey. Expectations for the three-year inflation rate fell from 3.6 percent to 3.2 percent over the same period. 

The decline is driven by improving consumer sentiment on gas prices. The July survey found that respondents expect gas prices to rise 1.5 percent over the next year, down from 5.6 percent the month prior. 

The national gas price average is expected to fall below $4 per gallon this week for the first time since March, according to an analysis from GasBuddy, a precipitous drop from June when prices averaged $5 per gallon. 

Consumers are hopeful that food price inflation will slow, too. Survey respondents expect food prices to rise 6.7 percent over the next year, down from 9.2 percent in June. 

The survey also found that consumers expect home prices to rise 3.5 percent, down from 4.4 percent the previous month. The market has cooled down as record home prices and high mortgage rates keep prospective buyers away. 

Those results come after the Federal Reserve hiked interest rates by about 2.25 percentage points to reduce consumer spending and get prices down. Chair Jerome Powell has signaled that more rate hikes are coming, indicating that prices aren’t falling fast enough to reach the board’s 2 percent inflation goal. 

“My view is that similarly sized increases should be on the table until we see inflation declining in a consistent, meaningful and lasting way,” Fed Governor Michelle Bowman said over the weekend at an American Bankers Association event. 

While the New York Fed survey showed drops in expectation inflation, the 6.2 percent one-year figure is still higher March. One year ago, consumers expected annual inflation to rise by just 4.8 percent.

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Biden to tout bill’s prescription drug prices, energy provisions in pitch to Americans, aide says

President Biden plans to use upcoming travel to tout the $740 billion climate, health and tax reconciliation bill passed by Senate Democrats on Sunday, a top White House official said.

“The president will — our entire team will be out making the case,” National Economic Council Director Brian Deese said on CNN’s “New Day” on Monday.

Deese said in upcoming trips Biden will work to sell the bill to the American people “to explain in very practical terms why this matters for people’s lives” and how the provisions will apply to everyday Americans.

Senate Democrats passed the Inflation Reduction Act (IRA) on Sunday, with Vice President Harris casting a tie-breaking vote. All Republicans voted against the measure.

The House is expected to take up the bill later this week before sending it to Biden’s desk for his signature.

The bill will, among other provisions, allow Medicare to negotiate the price of prescription drugs and set aside billions for investments aimed at combatting climate change.

Deese said the climate provisions will allow families to access “lower energy costs, lower utility bills, making it easier to access things like energy-efficient upgrades for their homes, energy-efficient appliances and the like.”

While some lawmakers have questioned the bill’s impact on battling inflation, Deese said the administration will make the case that the legislation will help lower prices for many Americans.

Biden has praised passage of the bill in the Senate — where his push for major spending on climate and other priorities stalled for months — and urged the House to quickly approve the bill.

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