Jun 9, 2022 - Economy

How inflation defied forecasts

12-month inflation expectations
Data: University of Michigan: Inflation Expectation, Federal Reserve Bank of Cleveland, 1-Year Expected Inflation, FRED; Chart: Erin Davis/Axios Visuals

Americans are congenitally pessimistic when it comes to inflation — surveys of where consumers expect inflation to be in a year's time generally show levels a point or two above the broad market consensus.

Why it matters: Historically, inflation has almost always come in significantly lower than we expected. But when it finally did spike, it rose much higher than even the pessimists had predicted.

What's next: Markets expect that consumer prices in a year's time will be 3.6% higher than they are today, per the Cleveland Fed. Consumers expect they'll be 5.4% higher.

  • Both numbers are well below the current rate of inflation, which means that for the first time in many years, America expects inflation to fall rather than rise.
Go deeper