A surge in US consumers’ inflation expectations prompted by President Donald Trump’s tariffs is posing a fresh threat to the Federal Reserve’s attempt to cool price growth in the world’s biggest economy.
Wednesday’s Fed meeting falls just days after a closely followed University of Michigan measure of consumers’ longer-term inflation expectations soared to its highest level since the early 1990s. American households expect inflation to be 3.9 per cent even years in the future, compared with 3 per cent in December.
The quickening pace of households’ inflation outlook, which has been driven higher by concerns over Trump’s levies on America’s trading partners, comes as policymakers were already struggling to convince consumers that inflation would fall to the central bank’s 2 per cent target.