Consumer Inflation Expectations Fall To 3%

Key Insights

• Consumer Inflation Expectations decreased from 3.4% in November to 3% in December. 
• Longer-term inflation expectations have also moved lower. 
• The significant decline in inflation expectations shows that Fed is successful in its fight against inflation.

On January 8, 2024, traders had a chance to take a look at Consumer Inflation Expectations for December.

The report indicated that Consumer Inflation Expectations declined from 3.4% in November to 3% in December, compared to analyst forecast of 3.3%. As a result, Consumer Inflation Expectations reached the lowest level since January 2021.

Importantly, median inflation expectations declined at all horizons. Three-year-ahead inflation expectations decreased from 3.0% to 2.6%, while five-year-ahead expectations declined from 2.7% to 2.5%.

Declining Consumer Inflation Expectations show that Fed’s policy is working well, and the central bank may have an opportunity to cut the federal funds rate in March.

U.S. Dollar Index tested session lows after the release of Consumer Inflation Expectations report. Treasury yields are moving lower, which is bearish for the American currency.

Gold is trying to settle back above the $2035 level after the release of the report. Weaker dollar and falling Treasury yields have provided some support to gold prices today, but the broad sell-off in commodity markets served as a significant bearish catalyst for gold.

SP500 settled near the 4720 level, supported by Consumer Inflation Expectations data. Traders bet on dovish Fed as it looks that the central bank succeeds in its fight against inflation.

For a look at all of today’s economic events, check out our economic calendar.