US consumers’ short-term inflation expectations in early 2025 may have been more unanchored than those observed in the late 1970s, according to a new report from the Center for Inflation Research at the Federal Reserve Bank of Cleveland. The study found that while professional forecasters’ expectations have remained close to the Federal Reserve’s 2 percent target since 2000 with little disagreement among them, consumer expectations were notably higher.
Consumers’ one-year-ahead inflation expectations peaked above 9 percent in early 2025. Although this is below the highest level recorded in the 1970s by the University of Michigan’s Surveys of Consumers, researchers Robert Rich and Alexander Cline found that when accounting for how varied consumer forecasts were during this period, the degree of unanchoring surpassed that seen in the late 1970s.
“Moreover, we demonstrate that this deterioration is linked to the self-reported political affiliation of survey respondents through changes in the distribution of their inflation expectations,” wrote Rich and Cline.
The Cleveland Fed serves as one of twelve regional banks within the Federal Reserve System and is headquartered in Cleveland, Ohio, with branches located in Cincinnati and Pittsburgh. It oversees financial institutions and delivers payment services while contributing to national monetary policy. The bank also conducts economic research to support community development across its district, which covers Ohio, western Pennsylvania, eastern Kentucky, and northern West Virginia (https://www.clevelandfed.org/).
The institution supports economic resilience for low- and moderate-income communities within its district (https://www.clevelandfed.org/). As part of its role in promoting stability and efficiency within national monetary systems, it participates in setting policy through its president’s involvement on the Federal Open Market Committee (https://www.clevelandfed.org/). The bank supervises financial institutions for safety and regulatory compliance and provides payment services to both financial institutions and the U.S. Treasury (https://www.clevelandfed.org/).
Beth M. Hammack serves as president and chief executive officer of the Federal Reserve Bank of Cleveland (https://www.clevelandfed.org/).
The full Economic Commentary titled “How Anchored Are Short-Run Inflation Expectations Today? A Look at What Consumers and Forecasters Are Telling Us” is available from the Cleveland Fed’s Center for Inflation Research.
