Inflation expectations among US households fell during June and October, according to new data released by the New York Fed, in contrast to rising market driven gauges over the same period.Three-year consumer inflation expectations fell from 2.86 per cent to 2.58 per cent between June and October – the run up to the US presidential election.
The data comes from the New York Fed’s consumer expectations survey, which is published every month based on a survey of 1300 heads of household.
In the same period, the 10-year “breakeven” rate, an influential measure of market inflation expectations derived from comparing the yields of conventional and inflation-protected Treasuries, rose from a low of 1.37 per cent in June to 1.73 per cent at the end of October.
Breakeven rates, which are closely watched by Fed policymakers, have since accelerated markedly in the wake of Donald Trump’s surprise election victory on November 8 and the prospect of a bumper spending injection for the world’s largest economy. The 10-year breakeven rate has now climbed to a one-and-a-half year high of 1.97 per cent this week.
One-year inflation expectations did see a slight increase in the household survey, rising from 2.54 per cent to 2.59 per cent.
The release also showed a decline in consumers access to credit compared with June. There was an increase in the proportion of applicants being discouraged or rejected for credit between June and October, although the release notes that’s June’s reading was the lowest level for consumers being discouraged from accessing credit since the survey began in October 2013.
Rejection rates returned to levels last seen in February 2015 and were particularly high for credit cards. Between June and October, credit card rejections, and requests for higher credit card limits, increased from 15 per cent to 18.6 per cent and from 16 per cent to 31.3 per cent, respectively between June and October.