Fed closely watching inflation
University of Michigan consumer sentiment survey Chairman Curtain said in an interview after the release that consumers aren't concerned about inflation. He said he was surprised by the drop in 12-month inflation expectations to 2.4% from 2.8% in April. That's the lowest level since 2010.
The 5-10 year measure of expectations also fell to 2.5% from 2.6% in the preliminary survey.
Other comments from Curtain:
- Consumers not paying attention to Brexit
- Consumers more focused on China/Asia than Brexit
- Rising incomes will keep spurring spending
Lower inflation expectations underscore the inflation problem for the Fed. Officials have done plenty of mental gymnastics to argue that underlying prices are rising but aside from housing, healthcare and commodities the Fed can't control, there isn't any hard evidence.
