Highlights of the latest NY Fed survey:
- Three-year inflation expectations 3.3% vs 3.1% prior -- highest since June 2022
- Five year inflation expectations unchanged at 3%
- Gasoline price expectations ease to lowest since Aug 2022
- Households more upbeat about current and expected personal finances
- Labor market expectations improved
Well this is decisively hawkish. The data has been rolling in and everything (including the stock market) is ticking higher. It has to be worrisome for the Fed that inflation expectations rose even as gasoline prices fell.
My belief is that Kevin Warsh is more worried about inflation then he’s letting on and is trying to talk tough so he doesn’t have to hike. It’s increasingly clear there will be inflationary impacts from the insane capex spree in AI and how it will reverberate into costs. The boom in equities is going to reverberate as well and it’s steadily showing up among consumers, at least in the mid-to-high incomes.
Another way of putting it is that Warsh is in denial that he’s going to have to hike. He can play for time for awhile and the latest non-farm payrolls report is helpful but the data about a strong consumer and inflation is adding up.
