A recent survey from the New York Federal Reserve indicates that Americans’ concerns regarding inflation have diminished, coinciding with President Donald Trump’s decision to retract some of his more drastic tariff proposals. This finding was revealed in a report released on Monday.
The survey, known as the Survey of Consumer Expectations, documented a notable decline in the one-year inflation forecast, which fell to 3.2%—a decrease of 0.4 percentage points from the previous month.
Looking ahead to the three-year inflation outlook, it dropped 0.2 percentage points to 3%, while the five-year estimate decreased slightly from 2.7% to 2.6%. Although these figures remain above the Federal Reserve’s annual target of 2%, they signify a shift in consumer sentiment that aligns with Trump’s earlier aggressive tariffs and his April 2 “liberation day” announcement.
Initially, Trump imposed a universal 10% tariff on all imports to the U.S. along with a range of reciprocal tariffs on various countries. However, he later eased these stance, choosing to create a 90-day negotiation period ending in July.
The New York Fed’s findings, which tend to be more stable compared to other consumer confidence metrics like those from the University of Michigan and the Conference Board, provide a much-needed boost for the White House as officials seek to mitigate concerns over inflation resulting from tariffs.
“By every measure of inflation, it’s down by more than it’s been in more than four years,” remarked Kevin Hassett, Director of the National Economic Council, during his appearance on Finance Newso’s “Squawk Box.” He noted that despite increasing tariff revenue, inflation rates were simultaneously decreasing, which contradicts the prevailing narrative but aligns with the administration’s messaging.
According to the Fed’s preferred personal consumption expenditures (PCE) price index, inflation was recorded at 2.1% in April, reaching its lowest level since February 2021. When excluding food and energy prices, the core PCE stood at 2.5%, a measure Fed officials consider a more reliable indicator of long-term trends.
Expectations for inflation across most categories declined, although survey participants anticipated a 5.5% rise in food prices over the next year, marking a 0.4 percentage point increase—the highest since October 2023. Meanwhile, expectations for gas price hikes eased to 2.7%, dropping by 0.8 percentage points, and projections for increases in medical care, higher education, and rent also saw a downward trend.
The survey also reported a positive shift in employment outlook, with the percentage of respondents expecting job loss over the next year decreasing to 14.8%, a reduction of half a percentage point.
Additional optimistic signs emerged, with the likelihood of missing a minimum debt payment within three months falling half a point to 13.4%, the lowest level since January. Furthermore, confidence in the stock market increased, with 36.3% of respondents anticipating higher market performance one year from now, reflecting an upward shift of 0.6 percentage points.
