US Economy News Today: Consumers Predict Higher Inflation

Money in Circulation Leaves Hints for Inflation-Watchers

Inflation continues to run hotter than the Federal Reserve would like. One less common indicator of price increases is the amount of money in circulation as estimated by the St. Louis Federal Reserve.

"It's a pretty good forward indicator for what's happening in the world of inflation, because essentially, if you think that the definition of inflation is too many dollars chasing too few goods, knowing how many dollars you have out there in the wild is important, right?" Bokeh Capital Partners founder and chief investment officer Kim Caughey Forrest said in an interview earlier this month.

The figure for March showed a pop to $2.34 trillion after dropping slightly in February. But it's still lower than the peak last year in June of $2.34 trillion.

-Christiana Sciaudone

Collins Confident Inflation Will Fall, But Rate Cuts May Come Later 

In an interview on Bloomberg News, Boston Fed President Susan M. Collins said recent inflation data doesn’t change her view that inflation is on a downward trajectory. However, it could take longer than anticipated for inflation to reach the 2% target, potentially delaying rate cuts, she said. 

“It doesn’t change my baseline outlook that inflation will continue to come down with a healthy labor market. I just think it will take more time,” Collins said. “It’s premature to tell whether the elevated numbers that we just saw are a bump on that path or something more concerning.”

In her remarks, Collins said she still believed it would be appropriate to begin cutting interest rates at some point this year, but it is “likely to be later than I had previously been expecting.”

-Terry Lane

Sentiment Dips as Consumers See Little Change in Economy

With sentiment moving sideways for the fourth straight month, consumers are sensing signs of an economic slowdown, the University of Michigan Consumer Sentiment Index showed. 

The Consumer Sentiment Index declined to 77.9 in the survey’s preliminary April reading, declining from March by less than two points. Since the start of the year, the index has fluctuated within a 2.5-point range, less than the five-point swing survey authors say is necessary to represent a true change in sentiment.

“Consumers perceived little change in the state of the economy since the start of the new year,” said Joanne Hsu, the university’s director of consumer surveys.

However, households are noticing the recent uptick in inflation. Their year-ahead inflation expectations rose to 3.1% in April, up two-tenths of a percent, while consumers see inflation moving up to 3.0% in their long-term, five-year-ahead expectations. 

“A slight uptick in inflation expectations in April reflects some frustration that the inflation slowdown may have stalled,” Hsu said. 

-Terry Lane