US Consumer Confidence: Inflation expectations cooled

University of Michigan’s Consumer Confidence July report has showed an unexpected modest rebound in the main index. Inflation expectations are cooled. This could represents welcome news for Fed’s policymakers and it makes the pressure to go big at the next FOMC meeting less intense after this week’s scorching CPI reading.

At 2.8%, consumer inflation expectations for the next 5-10 years are well within the past decades range, or what is considered well-anchored. This is welcome news after expectations rose to the top end of their recent range in the preliminary June release and raised concerns that expectations were becoming unhinged.

It also takes some of the heat off the fire for the Fed to hike rates a full 100 bps at its next policy meeting on July 27 and suggests the Fed may again opt instead for a still-large 75 bp hike. St. Louis Fed President James Bullard and Federal Reserve Governor Christopher Waller in separate public appearances on Thursday both backed raising rates by 75 basis points this month, and analysts expect this fresh data supports that view.