In the US August New York Fed consumer survey, inflation expectations for one year ahead fell more than expected to 3.58%, down from 3.63% in July, reaching the lowest level since May. Expectations for three years ahead also fell to 3.19%, and for five years ahead to 3.01%. This was due to a pause in the rise in oil prices following the US-Iran conflict. However, in September, with no end in sight to the conflict, oil prices have risen again, raising concerns about a resurgence of inflation, and short-term money markets are pricing in nearly a 62% chance of a rate hike at the September FOMC meeting. Consumer concerns about the labor market have increased, with expectations of a rise in the unemployment rate reaching the highest level since April 2020, and personal financial outlooks have also deteriorated. While Federal Reserve officials have expressed the view that current interest rates are not harmful to the market, consumers are increasingly worried about the labor market despite strong employment data, and if the FOMC proceeds with a rate hike, it risks further worsening the fiscal situation.
Rate hike expectations rise to 62% for September FOMC, implying higher policy rate.
Rate hike expectations and inflation concerns push long-term yields up.
