May Sees Eased Inflation Fears as Trump Calms Tariff Threats, Reveals New York Fed Survey

Americans are breathing a bit easier about inflation lately. A recent survey from the New York Federal Reserve reveals that worries are easing, thanks in part to President Donald Trump scaling back his tough tariff plans.

In May, the one-year inflation prediction dropped to 3.2%, down 0.4 percentage points from April. People also expect inflation to hold steady at 3% over the next three years and drop slightly to 2.6% over five years. While these figures are still above the Federal Reserve’s target of 2% annually, they signal a positive shift in sentiment.

Initially, Trump imposed 10% tariffs on all U.S. imports and suggested reciprocal duties on multiple countries. However, he soon backed off, offering a 90-day window for negotiations set to expire in July. This change has reassured many.

The New York Fed’s survey is considered more stable compared to others, like the University of Michigan’s metrics. National Economic Council Director Kevin Hassett noted on CNBC that inflation has dropped more than it has in over four years, even as tariff revenues rise.

In April, the Fed’s preferred inflation measure, the personal consumption expenditures price index, hit 2.1%, the lowest since February 2021. Core PCE, which excludes food and energy, stood at 2.5%.

Across the board, expectations for price increases have declined. However, respondents do expect food prices to rise by 5.5%, the largest jump since October 2023. Gas prices are anticipated to rise more slowly, at 2.7%. Sighter increases are also expected for medical care, education, and rent.

The job market shows encouraging signs too. The number of people fearing job loss in the next year dropped to 14.8%. Additionally, the likelihood of missing a debt payment fell to 13.4%, the lowest since January. Confidence in the stock market is growing, with 36.3% expecting it to rise in the next year.

This data reveals a shift in consumer confidence and expectations. Overall, as inflation fears dim, it reflects a broader optimism about the economy that had been missing for a while.

For additional context, you can check the complete details in the New York Federal Reserve’s survey and see how these trends compare to previous periods of economic uncertainty.

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