figure 1: CPI year-on-year inflation (black), the expected median of the professional forecaster survey (blue +), the expected median of the Michigan Consumer Survey (red), the median of the New York Federal Reserve Consumer Expectation Survey (light green), and the Cleveland’s forecast Federal Reserve (pink). Source: BLS, University of Michigan through FRED, Reuters, Survey of professional forecasters by the Federal Reserve Bank of Philadelphia, Federal Reserve Bank of New York, with Cleveland Federal Reserve.
The New York Fed’s indicator rose from 3.36% in April to 3.4% in May—down from 4.6% in May in Michigan.
It is important to remember that expected interest rates recorded by household surveys of inflation (Michigan, Federal Reserve Bank of New York) are usually higher than economist surveys (such as SPF) and recently higher than mixed market/survey-based surveys (Cleveland) . Judging from the changes in expected inflation from November to May 2020, the interest rates of the New York Fed and Michigan increased by 1.04 and 1.8 percentage points, respectively, in sharp contrast to the 30 basis points increase in SPF.
The Fed’s goal is the PCE deflator. In the past 20 years, the growth rate of the PCE deflator has been about 30 basis points faster than that of the CPI. This has been true since the pandemic (2020M03 to 2021M04).