New survey data from the New York Fed suggests Americans' expectations for inflation in the years ahead fell precipitously in December — back, roughly speaking, to pre-pandemic levels.
Why it matters: That's great news, if you believe — as many economists do — that high inflation expectations can be self-fulfilling.
By the numbers: Over the next year, the median consumer anticipated 3% inflation in December, down from 3.4% in November, according to the Survey of Consumer Expectations.
For the next three years, that was down to 2.6%, from 3%. For the next five years, that fell to 2.5% from 2.7%.
State of play: The new numbers are comparable to levels seen before the 2021-2022 inflationary surge. For example, the median three-year inflation expectation averaged 2.6% over the course of 2019, the same as the December level.
To the extent policymakers at the Fed have fretted over the possibility that inflationary psychology would become deeply entrenched, that looks not to have happened.
It also bodes well for the broader consumer sentiment outlook, which has been hammered by inflation.
Yes, but: Some cracks are appearing in Americans' outlook for the job market, per the data. The median respondent saw their income rising 3% over the next year, down from 3.1% in November and 4.6% a year earlier.
The average respondent saw a 13.4% chance of losing their job over the next year, down from November but well above levels in 2022 and earlier in 2023.